|January 2011 | VOLUME 12, NUMBER 1|
The Legal Industry in Transition
Managing a law firm or working in the legal industry the last few years has felt like living in the middle of a storm. Much of what we knew and had grown accustomed to has been questioned and challenged. We have been forced to confront change head on and it has been uncomfortable but, it was also inevitable. The legal industry has been long overdue for significant change and although the global financial crisis may have hastened the progress, it was not the only catalyst. Change is here to stay!
The legal industry has been impacted by three main drivers for change: technology, the changing role of in-house counsel, and globalization.1 The technology revolution has made more knowledge available to more people and spawned a multilayered and more sophisticated buyer of legal services. In-house counsel have increased in number and decreased the work briefed to outside counsel. They have articulated, with increasing clarity, their expectations of outside counsel through associations, initiatives, and calls for action. Although often shorthanded under the all-encompassing headline of "alternative fee arrangements," these expectations have driven much deeper and wider demands of outside counsel. These fee arrangements can only be mutually rewarding if highly motivated and highly functioning teams with project management skills are available to support the consistent delivery of cost-efficient, high-quality legal services. These two drivers for change alone demand an unprecedented level of focus on and investment in leadership, talent management, knowledge management, and technology but, when the demands are elevated to the global level, they increase exponentially.
In 2007 the legal industry saw its first firm, Slater Gordon, floated on the Australian stock exchange.2 Multidisciplinary practices will be possible in the United Kingdom next year.3 More and more overseas lawyers are qualifying to practice in the United States but are remaining resident elsewhere. More U.S. lawyers are moving overseas and practicing U.S. and local law from these locations.4 Legal process outsourcing organizations (LPOs) are taking on more and more commoditized work and delivering it from low-cost locations (inside and outside the United States).5 These LPOs are also competing with firms for other types of work. More and more overseas law firms are opening in the United States. This last year has seen a noticeable movement by U.S. law firms away from organic international growth to growth by transatlantic merger. The merged entities' combined presence in Asia, once rationalized, has resulted in coverage in additional countries and continents. Law firms are considering moving U.S.-based head offices overseas. Globalization is occurring in response to local, regional, and global clients doing business in more than one country, employing people in more than one country, and needing their legal advisers to service those needs in more than one country. Globalization means seamlessly practicing law through a single firm or as a member of a network of many geographically dispersed firms.
Law Firms and Change Management
For many firms, the depth and breadth of this change is daunting. It impacts almost every aspect of the firm from its business model, to governance structures, to leadership and talent management. It emphasizes more effective and efficient management of the firm's business performance and its talent resources. The nature and type of change required of 21st-century law firms cover all types of change management: strategic, structural, technology, process, financial, and cultural (attitudes and behaviors). It also requires change at all levels of the organization: firm, group, and individual. Change of this magnitude, if it is to be successful, must be proactively managed and navigated and it will take time.6 It requires different leadership skills, upgrading of skills across the board, and personnel counseling. The pivotal point, the place where change starts, progresses, ends, and supports continual improvement and adaptability, is communicationinside and outside the firm. There can never be too much communication! The big question for leading firms today is, therefore, increasingly less about defending the status quo and more about where and how to begin to change.
Ten Steps for Successful Change Management
There is no magic to change management. The magic comes from law firms embracing it and the adaptability, flexibility, and consequent competitive advantage it gives those firms in the marketplace. Change management is, in many respects, project management with significant consequences. However, if research into lawyer personality traits7 and the recent emphasis on project management training in law firms8 are any indication, change management may prove to be more challenging for lawyers than others. Lawyers are renowned for challenging assumptions (skepticism), being detail oriented, and working by themselves (autonomy and sociability) to deliver solutions to problems quickly (urgency). While this serves lawyers well in their legal work, it can sidetrack change initiatives that require time to take hold, a leap of faith to get done, and advanced skills in consensus building, stakeholder engagement, and relationship management for success. Project management skills (and other management skills) are mostly not taught in law school. Unless firms provide their own training programs (in-house or through external providers) or an individual pursues this as part of his or her own professional development, a lawyer receives no formal training in these areas.
Having noted this, the following 10 steps9 provide a checklist and starting point for any change management initiative:
A Few Thoughts to End With
Given the preceding discussion, it is not surprising that leading law firms have recently added a new skill set to their strategic management teamsorganizational and change management specialists or change agents. These specialists represent one of the outwardly visible examples of the many change initiatives taking place in firms today. Another is the adoption of competency-based development models mentioned earlier. The recent spate of law firm, in-house counsel, continuing legal education provider, and law school summits suggests that these changes in law firms will have a "knock on" effect in law schools. Defining competencies for the profession and changes to law school curricula that support a more practical emphasis and vocation transition from law school to law firm are shaping up to be some of the law school-based changes. The changes we are witnessing in our industry are not changes for the sake of change alone. These changes are overdue. They have come at a costfinancial and personal. But they have also sharpened our skills, demanded we develop some new ones, and opened the door to new voices, new approaches, and different ways to lead and manage law firms. They have encouraged us to manage our firms in a way that better aligns with client expectations and is more akin to business practices in the 21st century, and have pushed us to get comfortable with change as part of the way we will need to practice law in the "new normal."11
1. For a more detailed discussion of these topics, see Terri Mottershead, The Business Case for Talent Management in Law FirmsAre People Really Our Greatest Asset? in The Art and Science of Strategic Talent Management in Law Firms (2010); and Eversheds, Law Firm of the 21st CenturyThe Client's Revolution, An Eversheds Report on the Post-Recession Legal Sector in 2010, http://www.eversheds.com/clientsrevolution (last visited Sept. 26, 2010).
3. The Legal Services Board in the United Kingdom announced in February 2010 that licenses for alternative business structures would issue from October 6, 2011. In essence, this will mean that nonlawyers can invest in law firms and provide legal services outside the traditional law firm partnership model. See Claire Ruckin, LSB Greenlights Alternative Business Structures for 2011 Launch, Legalweek.com, Feb. 23, 2010, http://www.legalweek.com/legal-week/news/1593191/lsb-alternative-business-structures-green-light-2011-launch (last visited Sept. 26, 2010).
4. See, for example, the more than 400 percent increase in U.S.-qualified lawyers taking the Hong Kong Overseas Lawyers' Qualification Exam from 2008 to 2009 and holding steady so far in 2010: Suzi Ring, HK Bar Sees Influx of Applicants as US Firms Target Local Instructions, Legalweek.com, Sept. 22, 2010, http://www.legaltreehouse.com/?p=100 (last visited Dec. 22, 2010).
5. For a list of the many companies offering this service, see Prism Legal at http://www.prismlegal.com/index.php?option=content&task=view&id=88&Itemid=70 (last visited Sept. 26, 2010).
6. For a more detailed discussion of the change and talent management, see Heather Bock, Organizational Development and Change in The Art and Science of Strategic Talent Management in Law Firms (2010).
7. Larry Richard, Report to Legal Management, Herding Cats: The Lawyer Personality Revealed; Altman Weil (August 2002), http://www.managingpartnerforum.org/tasks/sites/mpf/assets/image/MPF%20-%20WEBSITE%20-%20ARTICLE%20-%20Herding%20Cats%20-%20Richards1.pdf (last visited Oct. 22, 2010).
8. See, for example, Altman Weil's work with Dechert: Gina Passarella, Dechert Puts Its Attorneys Through Project Management Training, Law.com, April 2, 2010, http://www.law.com/jsp/article.jsp?id=1202447368069 (last visited Sept. 26, 2010).
9. See Richard Luecke, Managing Change and Transition (2003) and John P. Kotter, Leading Change (1996).
10. See Luecke, at 3638 (citing John Kotter, Realizing Change, an interactive CD-ROM (1997)).
11. "The new normal" is a phrase used beginning in early 2010 to describe the shift in the legal industry to accommodate the drivers for change discussed earlier in this article. It appeared in advertisements for the Churchill Breakfast Club, Innovation and Change, A "New Normal" for the Legal Industry, March 3, 2010, http://www.churchillclub.org/eventDetail.jsp?EVT_ID=853 (last visited Sept. 27, 2010), and in an article discussing that event by Paul Lippe, Welcome to the Future: Embracing the New Normal, The Am Law Daily, March 19, 2010, http://amlawdaily.typepad.com/amlawdaily/2010/03/0319future.html (last visited Sept. 27, 2010).