Don’t blame BigLaw

In my last article, I groused about BigLaw’s record profits. The source of my frustration was the recent Am Law 100 report, and my concerns have been reinforced by last week’s Altman Weil flash survey.  My belief is that the rising profits have less to do with new innovation, efficiency, or value creation and more a product of doubling down on a client-unfriendly billing model. 

...BigLaw’s core business model is simply misaligned with the needs of customers

As a GC, I don’t like seeing firm fees and profits rising without a commensurate increase in value to the customer. I am not attacking the quality, responsiveness, and deep expertise of these firms. The issue is that BigLaw’s core business model is simply misaligned with the needs of customers. That said, this is the free market at work. Firms should charge what the market will bear.

If GCs and law departments want something to change, it is up to us to create that change. 

Change starts with us

This requires looking in the mirror and facing some uncomfortable truths about our own limitations. Most GCs are products of BigLaw, so we are most comfortable working in this model. We complain about cost overruns  and mismanaged billing surprises, but we go along with it because it is what we have always known. We know how to navigate inside that model. So we bear a big share of the responsibility for perpetuating it. 

Criticizing the status quo is easy, but ineffective.  We get the service and partnership from our law firms that we deserve. To effect change, we have to take the lead. This is not just about getting law firms to behave differently; this is about finding better, more efficient ways of doing things. And this means stepping out of our own comfort zone.

There are a lot of areas where we could improve. Let me suggest a few starting points.

1. We have to collaborate at scale

Our training and inherent biases push us to be inward, insular, and adversarial. When it comes to Legal, every company, every department, is an island. We tend not to consider the broader context, the commonalities that may connect us to peers and even competitors, and adjust our strategy accordingly. 

We need to share more. This goes way beyond “joint defense agreements,” although even those limited instances of collaboration remain challenging to implement. Even among entrenched competitors, we have common interests, for example GDPR implementation, the IT security of law firms, and leveraging productivity technology. In places where no competitive advantage can be gained by going it alone, why not pull together? Why should we each have to carry the costs on our own, when we all want the same basic result?

We are making some progress here. Some GCs are excellent at collaborating with each other, but we need to do more, and we need to bring law firms deeper into this collaboration. This requires getting clear about what really matters for competitive advantage and what we just need to run the business.  Competing law firms need to be friends sometimes too, for our mutual benefit. It also means we will need to be more realistic and accommodating with conflict waivers.  

2. We have to embrace new billing models

“New” billing models must become the default setting for law firm engagements. Flat fees, tiered billing, caps and collars, and success fees are woefully underutilized today, and we are to blame. A common concern raised on “my side” of this issue is that alternative fee arrangements don’t give us access to granular billing detail, so we can’t “see” effort expended to determine whether the deal we struck was “good.” My answer to this is simple – yes, that is exactly the point!

I am sympathetic to firms that complain about their clients wanting both a “prix fixe” meal and access to the costs of all the ingredients. In a flat fee arrangement, billing data is a crutch we don’t need.  We should be good enough at pricing projects to not require that data. Yes, sometimes the price will be better than the per-hour fee would have been, and sometimes it will be worse, but should I care? If a firm can accomplish a fee-based project with innovative staffing models that increases their profitability, I am OK with that. I trust my team to measure and price the valueof the work, however it gets done, and that is what counts. 

3. We must rethink risk

It is hard for most people to take risks, and doubly hard for lawyers. Our jobs are inherently tied to risk avoidance and loss mitigation. Corporate law departments are expected to be risk managers. This makes any innovation – which requires experimenting with unproven approaches – deeply uncomfortable. If we are to make real progress, however, we have to change the way we think about and manage risk.

We have plenty of data, anecdotal and quantitative, showing the limitations of the traditional template for running a legal department. If you play it safe, you will get predictable results: adequate for sure, but merely adequate. What’s the point of that? The only way to learn, grow, and change is to do things differently, and that means inviting the possibility of failure.

There are  so many compelling ideas that we should be exploring and piloting, like new staffing models and squad structures, automating rote and repetitive tasks (including knowledge based work), bringing technologists, project managers, accountants, and other professionals more deeply into the fold, and recognizing that many things that are “legal” actually do not require a licensed attorney.

Implementing new ideas is risky. None are guaranteed to work. That is OK; not everything works, and that’s part of the process of reinvention. Once you make that mental turn – from focusing only on minimizing risk to accepting constructive, experimental failure – you open the way to real change and innovation.

Nobody is going to force us to do it. We have to make a conscious, concerted effort to create the change and innovation we want. Let’s get started now.

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[As senior vice president, general counsel, chief compliance counsel, and secretary for NetApp, Matthew Fawcett is responsible for all legal affairs worldwide, including corporate governance and securities law compliance, intellectual property matters, contracts, and mergers and acquisitions. He has overseen the development of NetApp Legal into a global high-performance organization with a unique commitment to innovation and transformation.]