The flex revolution: Roundtable on the future of legal services

Several leading law firms have launched a flexible resourcing business in recent years,
including Berwin Leighton Paisner
(Lawyers on Demand), Freshfields (Continuum), Pinsent Masons (Vario)
and Allen & Overy (Peerpoint).

Managing Partner's roundtable convened to consider whether this
could become the dominant business model of the future. The topics discussed included the impact it would have on legal service providers in terms of operational efficiency, value and profitability, remote staff engagement, and learning and development.

 

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Roundtable Participants

Jill King

Jill King has been an HR professional for over 30 years. She joined the professional services sector in 1991, working for KPMG and then Lovells before joining Linklaters as global HR director in 2005. In 2012, she decided to pursue a second career as a writer, commentator and consultant. She is a member of Managing Partner’s editorial advisory board and the author of Law Firm Communications: Collaboration and Connectivity. Jill is a visiting professor at the IE law school and a faculty member of the lawyers’ management programme. She is also a consultant with Knights Company. 

Jordan Furlong

Jordan Furlong is a lawyer, consultant and analyst who forecasts the impact of the changing legal market on lawyers, clients and legal organisations. A principal at Edge International, he is the author of Evolutionary Road: A Strategic Guide to Your Law Firm’s Future and co-author of Content Marketing and Publishing Strategies for Law Firms. He also serves as legal innovation strategist in residence at Suffolk University Law School in Boston and is co-chair of the board of its Institute for Law Practice Technology & Innovation.

Manju Manglani (chair)

Manju Manglani became editor of Managing Partner magazine in April 2010 and has led its development into one of the most respected global resources on law firm management, with a broad base of expert contributors from across the professional services sector. She previously managed Oxford University Press’ publications on legal practice management, arbitration and energy law for practitioners. Prior to that, she was managing editor at Asia Law & Practice and editor of Asialaw magazine, focusing on legal and regulatory developments in the Asia-Pacific region.

Mitch Kowalski

Mitch Kowalski is a thought leader on the future of the legal services industry. He was selected as a Fastcase 50 global legal innovator in 2012 and is the author of Avoiding Extinction: Reimagining Legal Services for the 21st Century and the forthcoming The Great Legal Reformation. As a visiting professor at Western University Law School, University of Ottawa Law School and University of Calgary Law School, he teaches legal services innovation and worldwide trends in legal services. For much of his 23-year legal career, he practiced law at Baker & McKenzie and has also served as in-house counsel for municipal corporations in Canada.

Richard Hinwood

Richard Hinwood is a legal strategist and one of a new breed of law firm managers. Having qualified as a solicitor, he switched from the traditional legal career path immediately upon qualification to focus on professional service firm management. He works at Withers as a strategy and governance executive, advising on the formulation and implementation of corporate and business unit strategy. Richard holds an MBA from Cranfield School of Management.

Simon Harper

Simon Harper co-founded alternative legal services provider Lawyers On Demand (LOD) in 2007 whilst an equity partner at Berwin Leighton Paisner, where he led the firm’s technology, media and telecoms practice. He stepped down from the partnership in 2012 to focus on leading LOD. A long-time fan of creative lawyering, he was recently named by American Lawyer magazine as one of the 50 most innovative lawyers of the past 50 years.

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Improving operational efficiency

Manju: One of the purported benefits of using flexible resourcing is that it increases operational efficiency in law firms, which
in turn enables them to more effectively serve clients. Would you agree?

Mitch: Operational efficiency
has a number of moving parts, including how flexible and
how efficient the flex team is. If you're outsourcing the same inefficient processes, then you're not going to achieve very much. If the flex team has a culture of continuous improvement, then I think that adds to operational efficiency for the firm.Jill: I think the real trick here is
to actually work in an efficient manner. There are an awful
lot of inefficient working practices around, principally because workflows and processes are not written down. Very
little thought is given to legal work as a process or a project. I think some of the reluctance is fuelled by the motivation that comes from being in the moment of the transaction rather than working it through
as a proper documented process and delivering an efficient service.

As we know, a lot of what happens in law firms is focused on inputs rather than outputs, which is where the real value comes from. So I agree, becoming more flexible, having a flexible resourcing model will certainly improve operational efficiency. But it does need quite a fundamental shift in the way that lawyers think about their work and the extent to which they're prepared to change the way that they have worked for many years.

Simon: I would agree with that too and perhaps just add a practical point. As Jill suggested, lawyers haven't historically brought these efficiencies together in the way that they should, whether it's flexible resourcing,
the redesign of processes or new technologies. Though the ideal end point should be all efficiencies coming together, sometimes waiting for them all to align in one simultaneous miracle is just too big
a step. Actually, if you accept that it's not the end game, it is possible to add one at a time, whilst being mindful of the others.
It doesn't have to be perfection from day one of making a change. As lawyers, we love the perfect all-encompassing solution, but that concept can also be the thing
that paralyses us. One stage at a time
can work too.

Richard: Building on both
Simon and Jill's points, the managerial challenge of achieving operational efficiency is
twofold: first, in promoting and enabling the change to process-driven legal work and, second, in assessing and improving such process-driven output. While introducing a flexible workforce may be one approach to improve operational efficiency, the challenge of continuous improvement can be just as great.

Jill: Operational efficiency doesn't necessarily equate to greater profitability and so we do need to be clear about what's really being aimed for. It can be that, by becoming more efficient, the firm becomes less profitable, because it's been charging its clients for time it's spent on a matter rather than on the required output. So there are some interesting financial dynamics to all of this as well. Jordan: I think another key point is that operational efficiency is not inherently an attractive thing for many law firms. I think for a flex work system to really deliver advantages to a law firm, the firm needs a relatively sophisticated talent and workflow management system that does not rely on cost-plus pricing and labour-intensive operations. And I think that's something very few law firms can actually say.

New ways of working

Manju: While remote working enables greater flexibility for staff, it does risk removing the natural knowledge-sharing which would take place in an office environment.

Richard: The challenge, when
you take the physical space out, is to ensure that knowledge can still be passed on in some way. It's quite
a tacit thing, often even within a physical space, to actually see where and how that's happening. But there certainly has to still be a shared space where lawyers can interact so that knowledge sharing can occur.

Jill: I think really that's where technology comes in, with all
the opportunities it opens up for collaborative working. Having worked at
two large global law firms, I have to say, virtual working is day-to-day reality, because you're working with colleagues in other countries and other time zones who you may never have met.

So the very idea of having a community and sharing knowledge and socialising all have to operate in a much more virtual way. That requires people to think carefully about how they communicate and it requires consideration of how you build trust amongst people in those scenarios. But I don't think this is exclusive to a flexible business working model, I think it's as much about globalisation and different types of working relationships in the future.

Jordan: I think an additional challenge for flex work providers will be to constantly refresh and reinvigorate their talent pools, because there are going to be more such providers in future and there will be increasing competition among them to attract the people that they want to make available
to the market.

The flex work provider needs to be able to say: 'We're not just an alternative to working full-time in a law firm; we're actually superior'. We shouldn't assume that a BigLaw career is the zenith of
legal employment, the default setting
to which everything else should aspire.
Let's not take the large firm experience
as the ceiling against which we should
be pushing - I think we should be using
it as the floor from which to build.

Jill: I totally agree with that. It brings in another key point about the traditionally hierarchical way that lawyers work. There's the partner and then a team categorised by years of experience rather than skills.

I think the new ways of working, including integrating flexible workers, requires a much more linear view of working relationships. It's not so much about who's senior to who, but how each person in the process chain needs to rely on each other. That requires mutual respect and a degree of equality, so that those that are on flexible contracts or work for other organisations aren't seen as second-class citizens or deemed to be less important. If that is allowed to happen, then you run the risk of something going wrong or the quality of the work being compromised, with all the consequences that that might bring.

Plug-and-play lawyers

Manju: Let's consider a hypothetical scenario in which lawyers would not be tied to working for a single law firm but would instead be free to work on any matter for any law firm or client, barring conflicts issues. Law firms would be primarily staffed by a high volume of flexible staff, with only a skeleton staff retained. How would you feel about that?

Mitch: What would be wrong with a lawyer working for LOD and also for Agile, and also for Peerpoint and Vario - just 'plugging and playing'? Is that the natural evolution of this model, where lawyers will be free agents, plugging into any platform on
an as-needed basis? Jill: I'm really quite nervous about that as a future scenario. It gives me concerns about client confidentiality and commercial
or client conflicts. I'm also left with the question, is it really what clients want?
I think all roads should lead back to clients and, as much as they want value above everything else, they also want
a relationship with their legal providers and they want assurance around quality.

Manju: You often have the case where clients want to work with a certain partner and will follow him to his next firm if he leaves his current firm. Do think that having the ability to directly access experienced lawyers would benefit clients from that perspective?

Jill: It could do, but I think there are far more clients that want to work with the firm rather than the individual lawyer. It may be that there's a specialist partner who can take an institutional client with them but, typically, the general counsel want to make sure they are in safe hands and, if something goes wrong, they can talk about the reputation of the firm that they've employed, rather than an individual practitioner.

Simon: I think you're right that this sort of model, however it may extend, will never be the answer to most things, never mind everything.

Manju: Which other models do you think would be effective between the two extremes of lawyers being free agents and the current model in traditional law firms?

Simon: I think this question goes back in part to the point which Jordan raised earlier, which was perhaps 'be careful what you wish for' - this sort of utopia where everyone can work everywhere. How far we go down that road is partly in the hands of providers of alterative service models, but even more so even in the hands of the clients and the lawyers. Also, there are bigger social shifts going on - more that we can't control than we can.

Quality and training

Manju: With flexible resourcing providers depending on having
a continuous pool of legal talent who have been trained at traditional law firms, we should also consider the issue of the training of future flex lawyers. Do you think law firms should stop taking in trainees and instead outsource all routine work to flexible resourcing providers (retaining specialist work for senior lawyers)? And, what impact would this have on long-term quality management?

Mitch: This would allow firms to become very lean, then scale up and then back down as needed, using a flexible service provider. My own view is that that model isn't for everyone, but we'll see some takers.

Jill: I think it will all come down
to quality. Certainly in the law firms that I have worked for, there was a deep-seated concern about losing their ability to train their own lawyers. There is a sense of trust in the product if you've trained it yourself.

Buying in flexible resources from other organisations won't ever be the whole answer. I think the UK legal education model needs to be examined as well, so that lawyers can achieve their practical training to a suitable standard outside of the traditional law firm training contract.

Now, I realise that isn't going to happen anytime soon. But, I do think it raises questions about whether this much-vaulted panacea of a small lean law firm that just buys ready-trained talent is going to work, particularly on some of the high-risk transactions and matters, where getting small details wrong can have serious consequences.

Manju: How would you manage quality in that situation?

Jill: I think if you re-examined the structure of legal training, you could look at different models. For example, firms could combine their training budgets and collaborate with each other as a way of training qualified lawyers without relying on buying them in from somewhere else - because they've got to be trained somewhere - or continuing to hire all of those expensive trainees doing routine work. It seems to me something has to change in that mix.

Mitch: The way the current model works now is grossly inefficient and costly. If you look critically
at most large deals or complex litigation, there's definitely a need for a high level
of brain power, but that only accounts for perhaps 20 per cent of the work on the
file. The other 80 per cent doesn't need expensive talent to carry it out - and by
the fifth time you've done it, it's no longer intellectually challenging.

Jill: I agree with that, but some lawyers argue vehemently that 'you have to cut your teeth on
the more routine work because it gives
you a greater sense of all of the different legal angles, and it's only by building that experience, that you gain the knowledge and broad expertise to do more complex work in the future'. Maybe it is all smoke and mirrors, but there is something about how do you earn your spurs as a lawyer, where does that experience come from, and who's taking the risk while you're learning?

Jordan: Many large US law firms have completely abandoned new lawyer intake altogether. That's treading a very dangerous path. I think that there is great value in having new lawyers enter your firm, undertaking training not just in the practicalities of being a lawyer but also in the demeanour and conduct and professionalism of lawyering. I think the difficulty that law firms have run into is that they are perfectly happy to do that so long as the client is paying for the training. As soon as they have to pay for the training,
as soon they realise that, for the first two
to three years of their professional lives, these lawyers will be a net cost to the partners rather than profit centres, that's when they abandon the idea.

The second thing, which Mitch has pointed out, is that the nature of the training law firms do has not been terribly sophisticated - throwing someone in at the deep end is not a great way of teaching them how to swim.

So, this all comes back to the question of a range of options - on the one hand we have the traditional law firm model and on the other the full-scale free-agent lawyer status in a world of flex lawyers. I expect that, as always, we will wind up somewhere in the middle.

I can see in future flex legal businesses becoming more closely integrated with
a few specific firms or clients, becoming part of their talent and workflow ecosystem. The advantages that will flow include
fewer conflicts of interest - and I echo
Jill's concern about any path that leads
us towards erosion of conflicts principles - but it's also going to give those lawyers a better understanding of the protocols of firms and clients, greater familiarity with client businesses and with the industry, and over time, becoming a more specialised flex workforce. I think that will be a very interesting development in the legal market.

Richard: For people coming
into the industry now, whether under the traditional model or
as part of a more flexible model, they have to be trained for the role that they are going to be doing in 10 or 15 years' time.
I agree with Jill that legal education needs to change. How many lawyers do we
need in the future who operate and think as lawyers do now? Or should we be developing lawyers with wider skill sets, such as legal project management, to better equip them for more flexible ways
of working?

The other question that has come to mind as we've been discussing flexible resourcing is about the culture and core
at the heart of legal businesses. Right now, most firms have a partnership and a group of full-time office-based employees at their core to service their clients' needs and wants. But, the more that a firm switches towards flexible resourcing, it does beg
the question as to what becomes the
heart of these new operating models.

Mitch: If we're collaborating,
we could have a pooled training centre that feeds into a number of different law firms, whether it's run by
a flex provider or not, allowing firms to get out of the trainee business.

Jill: Well, somebody has got
to train them and, at the moment in the UK, even if you're hiring someone from LOD, some other firm has trained them. Is that right, Simon?Simon: Yes, it is, you're right
in terms of the original training contract. LOD then provides ongoing training of course.

Jill: So, LOD are not in a position to take on large numbers of graduates and train them up.

Mitch: I'm thinking about a future where firms use flex providers as 'farm teams' or 'reserve teams'. The flex provider covers the cost of
training and the firms are comfortable
with that training.

Jill: Potentially, I think that's just the sort of model I'd envisage. There's a huge amount of inertia, not least from the legal education providers, which mitigates against that. Despite all of the reviews of legal education in the UK,
all they seem to do is to tinker at the edges. I think it's time for a more radical rethink.

Beyond NewLaw

Manju: Let's imagine you have infinite resources to create a new law firm from scratch, rather than trying to modernise a traditional law firm in small increments. What model would you use and what would it look like?

Mitch: I'm a big fan of trying to forget about what law firms look like now and say, 'let's start from scratch'. If I didn't know what a law firm was supposed to look like, what would I build? Personally I prefer a corporate structure with good governance and an independent board of directors who formulate firm strategy based upon the best interests
of the firm - rather than the best interests
of certain partners.

Jordan: We're going to have a wide portfolio of options and models as the market develops. But, if I were to identify one serious problem in the current legal services provision model - and one that I think flex business models will be able to cure - it's the misalignment of talent with task. In so many law firms, lawyers are punching below their weight and tasks are priced above their value.
This is endemic - not just in law firms,
it happens in law departments as well.

My belief - or my hope, depending on how you look at it - is that, over time, greater transparency and growing client sophistication (because clients are getting more sophisticated all the time) will help
to ensure that most legal work is assigned to the most appropriately skilled and priced provider. I think there's a rationality and an operational workflow element to that which is largely absent from most legal services today. And that's where I can see flex legal services really coming into play and being part of that much-needed overhaul.

Jill: Well if that means moving away from the dreaded hourly rate then I'm all with you, because it drives so much of the inefficiencies and the mismatch between task and talent.

We've been talking about value-added billing for a long time and I know there is some of it around. But I think that if a client said 'this is what we think this transaction is worth to us, that's what we're going to pay' and the law firm then had to work out properly how to make that a profitable service, then we might get somewhere.

Jordan: Definitely, and part of
that is just changing the interests for whom the system operates - the billable hour system exists today because it's convenient, profitable and
easy for lawyers. And, because we have
a system today that is built on the interests of lawyers, not their clients, that is going to have to change - in fact, we are seeing a system emerge right now that is built on the interests of clients. And, ultimately, that is going to be a big part of the success of flex work systems as well. But, it's got to work for the client, as well as for the flex lawyers themselves - it's got to serve everybody's interests, and the client's interests above all.

Richard: Part of the whole connection with profit is how value is created through the operating model. If you were going to start with something new and fresh today, you'd obviously be looking for something that would give you a long-term competitive advantage. You'd be looking to create
new value that other competitors in the market don't provide, preferably in a way that is difficult for them to copy, although
of course it's always possible for them
to catch up over time.

Collaboration, flexible working and value pricing are all elements that firms
can use to create competitive advantage. But, there are various versions of how
that could work, depending on what each firm wants to do. Firms will still be different: they'll all have the same aim
of achieving competitive advantage,
but there are many different ways for
each of them to get there.

Jill: I agree, but I actually
think that, in the short term, competitive disadvantage is
a much greater threat than competitive advantage an opportunity.

Richard: Yes, very much so.

Jill: The firms which keep their heads in the sand, who think that, now that the economy is getting better, they can go back to the
old ways, the firms who aren't prepared
to think in different ways or be more flexible, they are the ones who will find themselves with a very distinct competitive disadvantage. Hopefully there will be some pioneer firms out there who really do take bigger strides to create competitive advantage as well, but I think you'll start
to see the divide going in the negative
way before it takes off in a positive way.

Mitch: Advantage certainly goes to new players who aren't saddled with the legacy issues that affect existing firms. If you're a firm that's been around for a while, you're going to have to create a skunk works
to experiment with new ideas, processes and workflows then gradually bring those practices styles over to the old firm. But I'm not hopeful about many following that route - most firms will avoid making major changes in favour of tinkering.

Manju Manglani is editor of Managing Partner (www.managingpartner.com)

Endnote

1. This is an edited transcript of the Managing Partner roundtable on flexible legal resourcing, which was held on 22 July 2014. The full version will be available later at www.managingpartner.com

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