A caricature may reveal a truth…
‘Why, if there is all the talk of change, is change so slow?’
One might be forgiven for thinking that there is rather too much talk of change in the legal profession and perhaps rather less evidence of it happening. It is not easy to see the wood from the trees sometimes, but I would like to offer a perspective on why this may seem to be the case from both a law firm and a client point of view.
On the ‘sell’ side it is arguable that change has not been slow, just not evenly distributed (to borrow from William Gibson ‘The future is here, just not…’). By analogy in any rural part of the country there will be places where the mobile phone signal is weak, but we wouldn’t use that fact to deny the mobile telephony revolution.
It is fair to say however while there are shifting sands in the legal services market, there has been a slower than imagined take up of new business models in terms of their grab of market share. So far at least the traditional law firm model has not been seriously threatened by new entrants.
However this is less about the attractiveness of alternatives and more about law firms being able to trade on ‘buy’ side inertia.
So not much sign of revolution. That said for many law firms the wind of change has at least exposed their lack of resilience when cash-flow and profitability are less grippy. The strategy of choice in these circumstances is to merge rather than to invent. It would appear that a head in the sand is worth two in the clouds.
So why is there ‘buy’ side inertia?
For many in-house teams it is just not feasible to make significant change quickly. We often fall into the trap of discussing the ‘in-house sector’ as if it were a single market buyer, a homogenous whole or some sort of legal collective. In fact the reality is of course a market of single entity buyers where, for most teams, the time they can give to genuine law firm management is a tiny percentage of their working year.
Add into this construct the fact that law firms really have zero incentive to change the market – indeed they are incentivised to entrench inefficiency.
What emerges as a result is a form of legal services ‘Stockholm Syndrome’ that plays out between law firms and their hostage clients.
The in-house model is typically lacking in any significant infrastructure; typically under-resourced and typically lacking an ability to plan beyond an event horizon of a few weeks. In essence the in-house model relies on a strong work ethic, a capacity to conflate pleasing people with doing the right thing and a resistance to any change that challenges dependency of individual lawyers giving advice to individual colleagues in the their business.
At the same time law firms stick stubbornly to charging for time which is just perfect for situations where there are late instructions, incomplete briefings and uncertain performance indicators/goals. All of which simply means that law firms make more money on the back of the lack of their clients’ infrastructure, efficiency and strategy.
Their strategic imperative therefore is to maintain this wholly imbalanced relationship. Law firms are incredibly polite abusers. Clients are the grateful abused
Law firms should be supporting their clients to improve resilience, create better process and manage risk more effectively; but if they did this they would lose money. So, consciously or unconsciously, law firms do not focus on making their clients more efficient; instead they focus on ‘relationship management’.
Law firms wrap their key clients in a comfort blanket of relationship support – PLEASE call me anytime, anywhere, let’s be friends too, we can dig you out of ANY hole, NOTHING is any trouble… YOU are one of our platinum clients and we LOVE you.
Flattered and seduced the client is nevertheless still a captive in this carefully played out charade. Metaphorically drugged-up on vanity strokes from relationship partners who chaperone their clients from one cocktail reception to another avoiding difficult conversations about process improvement, efficiency savings, risk mitigation, management reporting etc, etc.
The result is that in-house teams have weaknesses disguised by their ‘friends’ in law firms who will provide all the fixes they need, just at a price.
(In some cases they will even nominate the in-house teams for awards, so beautifully inefficient have they become it deserves a gong).
Law firms are boutique purveyors of new clothes for emperors and where dependency is created and embedded. The longer it continues the more dependent the in-house team becomes and the less likely it is to change.
The result is that all the talk of change in the market is therefore mostly still just talk. Until the happy dependency is broken, until the power balance is shifted, change will be slower than should logically be the case.
As an aside, General Counsel have been given more power in recent years. If they appoint firms to a panel than every few years they may wield the axe to drop some firms from their panels. It should be an opportunity to rebalance the power, but in reality it only means that these GC’s are abused more deeply by fewer law firms.
The energy that is needed therefore to reset this paradigm is huge, always underestimated and rarely achieved. We are seeing the end game of this type of relationship, but the tentacles are tight and not easily dislodged. See how a GC will side with a law firm against a procurement colleague; see how law firms will fight dirty often going to supporters in the business if a GC hints they may not survive a panel cull.
Dysfunction distilled.
So where is the answer if law firms will always resist change and clients do not force change? I believe the answer lies in three separate thoughts that have not yet combined, but will surely do so.
First is that some law firms will break for cover. They will see the writing on the wall and move into a period of invention rather than staying in denial. Second the new entrants will gain some further traction and will get a critical foothold in the market. Third a few GC’s will stop using law firms quite so much and will instead source support from publishers, technology providers, the independent Bar and lawyers on short term contracts working in the in-house team on well defined tasks.
There is more than just talk… but maybe we need to look beyond the noisy ones and see where quiet progress is being made…Even when caricatured.
Paul Gilbert is chief executive of LBC Wise Counsel. To read his blog click here.
