Page 51 - 2019 - Leaders in Legal Business (q)
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minimal accountability for the partners expected to deliver results. After all, so long as aggregate
revenues exceeded aggregate costs by a comfortable and increasing margin each year, the details
of how firms reached their targets were less critical.
Tactics also ruled the day for many in-house law departments, as there was a prevailing
expectation that legal services are, and always will be, a cost center rather than a profit center. As
a service organization to its internal corporate clients, the law department’s reactive posture to
whatever new strategy the corporate executives dreamed up left its leaders in a perpetual state of
keeping up — hardly the best position from which to proactively organize and reexamine the role
of the legal function.
The global economic recession that began in 2008 demonstrated beyond a shadow of doubt
that legal services organizations are subject to the same economic realities of other businesses, and
with declining demand — or, in the face of emerging substitutes and alternatives for the provision
of legal services, at least declining demand for the old ways and old prices — law firms and law
department leaders have finally recognized that engaging in more formal strategic planning is not
just a good idea, it’s also most likely the difference between a thriving organization and one that
is facing an inevitable decline.
Law firm leaders must account for both internal and external factors: not only what
practices we want to offer, but what services are the market willing to buy, and at what price? They
should no longer be deluded by the notion that “all revenue is good revenue.” Profitable revenue
streams take precedence and deserve, and should consume, a greater portion of the firm’s resources
and investment. Law department leaders, in turn, have come to realize that senior corporate
leadership simply do not find credible that legal costs increase every year, in all areas, at a rate
greater than other corporate costs, and cannot be predicted with any confidence, and furthermore
that reducing legal spend will inevitably expose the business to greater risk. So, with these
realizations, what are they doing about it?
Asking for Help
Perhaps the most notable change in post-recession legal organizations is the increasing
influence of business practices and trained business managers to help guide strategy and
operations. To be sure, many law firms and law departments have long employed experienced and
sophisticated executives, some with long experience in law firms and others from industry. But by
and large, these voices were muted, as those tasked with practicing law have always been afforded
the benefit of the doubt when building an infrastructure to support their needs.
Second-guessing a partner’s demand for resources, or marketing tactics, or staffing
preferences, or use (or avoidance) of technology tools, or approach to pricing and discounting, was
deemed to interfere with and potentially impair the quality delivery of legal services and expose
the law firm to client dissatisfaction at the very least. In recent years, a U.S. state bar ethics panel
ruled,2 in so many words, that even allowing a business person to have a “chief” title implies that
businesspeople have undue influence over a law firm’s practices, creating an ethical breach and a
conflict between good business sense and the practice of law.
Leaders have discovered, however, that good business sense prevails. In law departments,
there is a rise of legal operations executives tasked both with managing the day-to-day activities
of the legal function and with finding ways to improve quality, throughput, and responsiveness
while decreasing costs. Law firms have sought highly-experienced corporate executives to lead
2 Opinion 642, TEXAS CENTER FOR LEGAL ETHICS, http://legalethicstexas.com/Ethics-Resources/Opinions/Opinion-642.aspx.
36
revenues exceeded aggregate costs by a comfortable and increasing margin each year, the details
of how firms reached their targets were less critical.
Tactics also ruled the day for many in-house law departments, as there was a prevailing
expectation that legal services are, and always will be, a cost center rather than a profit center. As
a service organization to its internal corporate clients, the law department’s reactive posture to
whatever new strategy the corporate executives dreamed up left its leaders in a perpetual state of
keeping up — hardly the best position from which to proactively organize and reexamine the role
of the legal function.
The global economic recession that began in 2008 demonstrated beyond a shadow of doubt
that legal services organizations are subject to the same economic realities of other businesses, and
with declining demand — or, in the face of emerging substitutes and alternatives for the provision
of legal services, at least declining demand for the old ways and old prices — law firms and law
department leaders have finally recognized that engaging in more formal strategic planning is not
just a good idea, it’s also most likely the difference between a thriving organization and one that
is facing an inevitable decline.
Law firm leaders must account for both internal and external factors: not only what
practices we want to offer, but what services are the market willing to buy, and at what price? They
should no longer be deluded by the notion that “all revenue is good revenue.” Profitable revenue
streams take precedence and deserve, and should consume, a greater portion of the firm’s resources
and investment. Law department leaders, in turn, have come to realize that senior corporate
leadership simply do not find credible that legal costs increase every year, in all areas, at a rate
greater than other corporate costs, and cannot be predicted with any confidence, and furthermore
that reducing legal spend will inevitably expose the business to greater risk. So, with these
realizations, what are they doing about it?
Asking for Help
Perhaps the most notable change in post-recession legal organizations is the increasing
influence of business practices and trained business managers to help guide strategy and
operations. To be sure, many law firms and law departments have long employed experienced and
sophisticated executives, some with long experience in law firms and others from industry. But by
and large, these voices were muted, as those tasked with practicing law have always been afforded
the benefit of the doubt when building an infrastructure to support their needs.
Second-guessing a partner’s demand for resources, or marketing tactics, or staffing
preferences, or use (or avoidance) of technology tools, or approach to pricing and discounting, was
deemed to interfere with and potentially impair the quality delivery of legal services and expose
the law firm to client dissatisfaction at the very least. In recent years, a U.S. state bar ethics panel
ruled,2 in so many words, that even allowing a business person to have a “chief” title implies that
businesspeople have undue influence over a law firm’s practices, creating an ethical breach and a
conflict between good business sense and the practice of law.
Leaders have discovered, however, that good business sense prevails. In law departments,
there is a rise of legal operations executives tasked both with managing the day-to-day activities
of the legal function and with finding ways to improve quality, throughput, and responsiveness
while decreasing costs. Law firms have sought highly-experienced corporate executives to lead
2 Opinion 642, TEXAS CENTER FOR LEGAL ETHICS, http://legalethicstexas.com/Ethics-Resources/Opinions/Opinion-642.aspx.
36
