The End of the American Way?

Jordan Furlong authored yet another excellent article on his Law21 blog, this time about the potential obsolescence of law firms whose leaders are too clueless to see and react to the changes in the market.  See How to Kill a Law Firm.  He refers to the rapid, but not unexpected, emergence of new competitors to the traditional large law firm. Firms such as Legal Process Outsourcing (LPO) providers, technology vendors, small firms enabled with technology and low cost structures and access to virtual resources able to compete with global firms, and so on. As Jordan paints the picture, law firm leaders should have something to fear from competitors who employ a rigorous approach to entering new markets, with the discipline to get out if they can't succeed:

"Accordingly, these entities are now sizing up the legal profession, looking for weaknesses and soft spots to exploit. They have several advantages, including financing, business savvy, and patience. But their most powerful weapon is their attitude: unlike most lawyers, they believe there’s nothing natural or pre-ordained about lawyers’ domination of the legal services marketplace, and they believe it can be ended within the decade. Very few lawyers believe this, and very few law firms are taking the Jack Welch approach of both knowing your enemy and adopting its methods."

But are law firm leaders listening? And does the problem lie primarily with the large law firm mindset?

In the past several years I've delivered multiple talks to groups of lawyers on the future of the legal profession. In one notable case, I explained how in a previous life my team and I determined that our business could disintermediate hundreds of law firms, save the courts time and expense and return to defendants millions if not billions of dollars that were otherwise diverted for plaintiff lawyer fees.

How? Well the details aren't all that important, but suffice it to say that a company routinely hired by plaintiff lawyers to find hundreds, thousands, even millions of potential claimants; assess eligibility of these claimants; gather, compile and submit documents on behalf of all qualified claimants to the court; receive and safeguard settlement funds; disburse these funds according to court guidelines to all qualified claimants; and provide regular compliance reports to the court; could quite easily add a plaintiff lawyer or two to the payroll and eliminate the need for injured parties to give up 30-40% of an earned settlement by hiring individual plaintiff lawyers to represent them. Our staff plaintiff lawyers could handle the legal work while we would automate the rest.

Sure there are some holes, and it's a tad more complicated than it appears, but with time and energy we knew we could address these issues. After all, when the most successful plaintiff lawyers travel around in their privately-owned jets, we correctly deduced that there was enough financial incentive for plaintiffs/claimants to try a new approach if it meant keeping more of the settlement they "earned" through some hardship.

Now, I have no particular beef with plaintiff lawyers, and I believe they perform a critical role in our society and they deserve to be richly compensated for their efforts. But that doesn't mean as a businessman I like them enough to not find a way to do what they do more efficiently, and in so doing earn some of the proceeds of that efficiency.  I like my Audi too, but on my next purchase I'll still try to obtain the best deal.

One of the plaintiff lawyers in the room where I gave this anecdote, a former leader of her local Bar Association, rose in outrage. She proclaimed that what I described was nothing short of a second American Revolution, requiring the suspension of the rule of law and leading to a complete loss of freedom and the American way. She was dead serious. Her inability to see how technology and savvy business processes were better for her clients than her warehouse full of disorganized boxes of claims and supporting documents led her to perceive that any change to the status quo was tantamount to anarchy.

Similarly, in my large law engagements I'm regularly confronted with partners whose every action shouted "This is the way it is, the way it's always been, and the way it always will be, and I have only so much patience for you little people who suggest I change my ways merely because the clients desire I do so."

Lest I and other pundits like me come across as somehow disgruntled with the legal profession, nothing could be further from the truth. I've spent most of my adult life working to support and improve the business of the legal profession. It's frustrating to see such obvious opportunities for positive change overlooked by leaders of enterprises whose primary focus should be on operational improvements to win and keep business. Instead I see a lot of hand wringing, hiding in the sand and cost-cutting masquerading as business process improvement.

I'm hopeful law firm leaders will learn. In some cases it may be only after they're hired as a salaried lawyer by an entrepreneurial outfit that siphoned off their firm's clients, improved efficiency, quality and client satisfaction, lowered costs and increased profitability.  And they'll eventually learn how startling easy it can be, relative to obsolescence.

No reason that entrepreneurial outfit can't be your own firm, starting today.