Legal Week sounds
the alarm about the coming of the "procurement
professionals" to the selection and hiring of outside counsel, and predicts,
based upon their impact in other sectors:

• at least a 15% reduction in fees;
• greater objectivity in the selection process (less value put on "networking");
• more rigorous performance measures;
• formalized contracts and agreements throughout the relationship,
  starting with RFP’s; and
• performance-based remuneration.

Appalling?  Surely so, from the traditionalists’ perspective, but
I’d like to suggest another way of approaching what to many will seem
a skunk at the garden party.

Let me lay the groundwork for what I’m about to recommend by flatly
predicting that the involvement of "procurement professionals"—if
not formally, then the toolkits and mind sets they advance—is not
only here to stay, it will only grow.

Why?   Econ. 101:  There’s simply too much money at stake.

And the Econ. 101 "Competition Made Me Do It" Corollary:  As
soon as a Fortune 500 company adopts procurement professionals
for its legal spending decisions, any serious competitor of that company
is going to have to look at doing the same.

Legal Week offers three tactics for dealing with this:

1. "Prevention is better than a cure."  In other words,
   forestall having the selection process captured by the procurement
   professional, by appealing to senior executives’ visions and ambitions,
   and the (invaluable) contribution your firm makes to the realization
   of those ambitions.
2. Embrace commoditization:  If you can build the IT systems, and
   install new assumptions about hiring and training associates and para-professional
   staff, you could conceivably become the procurement professional’s
   "go-to" firm.  More on this below.
3. Hope it will all go away, and in the meantime meet them on their
   own terms.

(3) is obviously not advisable; it’s surrender without a fight.

(1) is ideal if you can pull it off, and certainly entails the least
disruption to existing relationships, practices, and assumptions.  In
this sense it’s also the most familiar and comfortable.

I
might add that there’s truly something to be said for the sense of
reassurance, confidence, and trust that comes with a long-standing relationship
with a close advisor.  And that it is precisely under these conditions
that you can and should be "reassuringly expensive."    No
one would engage a procurement professional to select a cardiac surgeon,
and the depth of expertise, wisdom, and instinctive good judgment that
one achieves only after years of practice have no price.

Consider a story I heard earlier this week from the managing partner
at an AmLaw 25 firm:  A client had inquired to a department chair
at the firm about a sensitive, complex, and nuanced matter, at the intersection
of law, ethics, and the client’s reputational capital, and in the course
of a meeting lasting less than an hour came to a complete understanding
of the ramifications of their situation, and the options going forward,
and had put in place a concrete plan of action.

The firm delivered a bill for $10,000, which the client’s law department
promptly and happily approved; but when it arrived at accounting to be
paid, it was rejected for want of itemized specificity.   Ultimately,
things were resolved in the law firm’s favor, but does anyone doubt for
a moment that a bill for the exact same amount, generated by three low-level
associates arduously itemizing time, would have sailed through accounting?  Despite
the utter disconnect in "value received" by the client?

[This also reminds me of my favorite, true, headhunter’s story:   A
firm retained a headhunter to find, vet, recommend, and place
a lateral partner in a hotly competitive and arcane practice area.  Forty-eight
hours later the headhunter introduced a candidate who breezed through
the interview process and was hired within weeks.  "For services
rendered:  $100,000."  The managing partner—a different
one!—sputtered that the recruiter had taken so little time that
the charge should be reduced.  Replied the recruiter, who did collect
the full amount, "You hired me to save time."]

---

Now let’s get to the interesting choice:  (2), "embracing commoditization."

Here one can do no better than to study at the feet of Tony
Williams,
who wrote
late last year about precisely this:

"There is often a degree of unreality in a law firm’s
approach to the commoditisation of legal services. The first approach
is denial: ‘No, of
course we do not do that sort of work, but firm X does.’ The second
answer is: ‘Yes — but we do very little, although it is useful for training
our junior lawyers or trainees.’ The third answer is: ‘We do not do much
now but we anticipate more of our work becoming commoditised and do not
know how to cope with it.’"

I—with Tony—am here to tell you:  (1)  denial
is becoming an increasingly untenable attitude to adopt towards commoditization;
and (2) it’s actually nothing to be afraid of, but rather a phenomenon
to be embraced by forward-looking firms with new tools and techniques
that can both delight their clients and continue the happy ever-upward
march of profitability.

Why is denial untenable?  Consider the moves by "thought leader"
corporations such as DuPont, GE, and Motorola to streamline, outsource,
and rationalize their legal spending. 

Consider Cisco’s building
a web application to enable its managers to walk through garden-variety
employment law questions online, with the content and "intellectual property"
behind the scenes provided by Eversheds.  Consider Forrester Research’s
report that 12,000 US legal jobs had already moved to low-cost areas
such as India and Eastern Europe, and predicting the number would triple
to 39,000 in 2010 and then double again to 79,000 in 2015.

This toothpaste is not going back in the tube.

Perhaps most dramatic of all will be—I predict—the surprisingly
rapid development of brand-new business models delivering baseline legal
services in the UK following implementation of the Clementi
Commission’s report and the subsequent enabling White Paper.

In a nutshell, as I’ve noted
previously, the Clementi reforms will permit wholesale ownership of
legal practices by non-lawyers.  If you reflect on this for five seconds
or more, the implications become clear:

• "Non-lawyers" is a large enough category to embrace public and private
  companies, the public at large (can you say, "IPO"?), private equity
  funds, etc.
• These types of owners bring with them intrinsic access to great amounts
  of capital.
• "Capital is [almost] irrelevant to law firms—and is certainly
  not a meaningful restraint," you say.  True enough, for the
  AmLaw 200 and the UK 50 as they exist today, but access to tremendous
  amounts of capital permits creation of hitherto unprecedented types
  of legal practice.  Imagine an "H&R Block Law," or
  a "Wal-Mart
  Law," or a "Citigroup Law," and you begin to be able
  to envision the possibilities
• New, strongly branded legal service providers, using state-of-the-art
  technology, sophisticated advertising and marketing campaigns, will
  presumably begin to serving Mr. & Mrs. Consumer, with real estate closings,
  routine tax advice and business formation, divorces, estates, and trusts.
• But how long will it be before they begin creeping into small business
  services?
• And then larger business services, working their way inevitably up
  the learning curve, using proven systems and processes that guarantee
  the client:
  • A known result
  • At a fixed price.

This is actually both more and less than a "prediction:"  It
is simply a description of how competitive marketplaces work.

What’s the bottom line?

Change is afoot. 

Firms that seize the once-in-a-generation opportunity
to truly understand ("grok," as
they say), the change that clients are going to impose on our industry
will emerge more client-focused, stronger, and more profitable, than
those that lag behind or engage in comfortable denial for too long. Tony
Williams nicely states the alternative to change: "You can do
nothing — but only if you intend to retire within the next five
years."

I know it’s hard.  So I will offer my favorite quote on how difficult
change is, from the always-masterful Machiavelli:

“There is nothing more difficult to carry out, or more doubtful of success, nor more dangerous to handle, than to initiate a new order of things. For the reformer has enemies in all those who profit by an old order, and only lukewarm defenders in all those who would profit by a new order. This arises partly from the incredulity of mankind, who do not believe in anything new until they have had actual experience of it.”

What alternative do you propose for your firm?