12 July 2016

My nine-year-old lawyer

You’re sitting in the vast reception of an expensive, upmarket law firm, sipping your perfect cappuccino and scanning your email (again), when you look up to find yourself literally eye-to-eye with a smiley four and a half feet tall nine-year-old girl in a surprisingly tailored business suit. She politely introduces herself as Zoë, and she's your lawyer.

Do you buy it, or do you beat a hasty retreat to the exit?

As humans, we’ve always naturally associated age with wisdom, and experience with expertise. We all like to think we learn as we go through life. So when we meet our lawyers, we’re instinctively asking “do I trust these people to deliver?” and frankly, if they’re nine years old, we’re almost certainly not going to.

Law firms know this of course, so they’re not ever going to field a team of kids, or even in many cases, a team of millennials (yet). Law is a knowledge business, where grey hair most definitely is considered a positive.

But peeling back the metaphorical onion reveals a curious and limiting consequence for law firms. The legal profession’s obsession with experience appears to be failing its clients.

Conscious of appearing heretical, I’m going to take you back to my nine-year-old lawyer. What if Zoë actually did have the expertise to advise you on your contracts?

If you think I’m now being ridiculous, you must be assuming that because Zoë doesn’t have the experience, she couldn’t have the expertise, but that would be making exactly the same mistake as law firms.

When law firms recruit their lawyers, they look for experience. A partner is having a good year and can’t service all her clients. Ideally, she wants another lawyer to hit the ground running and require minimal supervision. She’s busy enough as it is, with the talks she needs to write, clients to schmooze, and those very important internal meetings to attend. She needs a PQE5-7 (a lawyer with around 5-7 years’ qualified relevant experience).

In a top London firm, an experienced associate lawyer can cost up to £200k a year (fully loaded), plus around £25k-£30k in one-off recruiters’ fees. That’s a substantial cost to recover from clients.

So let’s just pause there and consider why our partner needs to make this chunky investment. She needs a lawyer who can do their job relatively unsupervised. The assumption is, therefore, that she needs an experienced lawyer and actually, she does, but why?

Have you noticed how, wherever you are in the world, you know what you’re getting when you order a coffee in Starbucks or a burger in McDonalds? Have you ever stopped to wonder why that is? It isn’t because when these businesses open a new restaurant they recruit experienced baristas and burger flippers. They do exactly the opposite, recruiting young people with almost no directly relevant skills. So how come when you buy a Starbucks or McDonalds you don’t get a completely random coffee or burger?  It’s because, unlike the legal profession, Starbucks and McDonalds know that expertise doesn’t actually require experience.

It’s all relative, of course. It’s easier to make a decent coffee than it is to provide legal advice, but it absolutely is possible to build an inexperienced team of expert lawyers. Law firms may not want to believe it, but legal process outsourcing and legal technology are only the tip of an extremely sizeable iceberg with which they are on an inevitable collision course.

Let’s go back to our busy partner. She has a successful practice, is in demand and needs help servicing clients. She thinks she needs an experienced associate, because law firms always scale by hiring the experience needed to meet demand. If she hired an inexperienced lawyer, she would probably have to redo their work, which clients wouldn’t be happy to pay for, and she hasn’t the time anyway. No, she needs an experienced lawyer.

Now let’s take a look at how our globally successful restaurant businesses would approach this. Deciding that they wanted to get into law, they would hire the most experienced lawyer in the field. They would then instruct that lawyer to create all the tools and processes required for bright, capable and hardworking, but completely inexperienced lawyers to do what their most experienced lawyer does. Then they would hire the inexperienced lawyers for half the cost of our partner’s experienced associate, enabling them to profitably undercut our partner and win her clients.

Of course, Starbucks and McDonalds are extremely unlikely to get into the legal profession, but my point is not hypothetical. Their scaling principles are not at all unique and are widely practised outside the knowledge professions. Yet reading this, you may well still be tempted to believe that professional expertise simply cannot be reduced to tools and processes. You may argue LPOs and technology suit only low complexity work, and that legal practice will always require bespoke judgement that can never be replicated. If that’s the case, then surely lawyers are immune to competition?

The fact is, today’s legal services market is highly competitive and increasingly utilitarian. Law firms are running out of options if they want to remain profitable. Very few partners do work that their senior associates cannot do, and that inexperienced lawyers could not also do with the right tools, but it will take a new breed of legal services provider to drive change from within the private practice profession. I can’t see many law firm partners willingly making themselves operationally redundant.

But the in-house profession is different. General counsel operate within organisations built on the very scaling principles that law firms have ignored. Their Boards expect them to be operationally efficient in providing quality legal support to their businesses. Cost inefficiencies can’t simply be passed through to clients. General counsel must make profit for their clients, not profit from their clients. So is it really any surprise that in-house legal teams have begun organising themselves to deliver scalable legal services?

General counsel have realised that there are many areas of expertise that can be captured and then delivered, not by highly expensive lawyers, but by cheaper, less experienced lawyers and even non-lawyers. By doing so, they are releasing their senior lawyers to focus on higher value strategic advice to their businesses, and to cover areas previously outsourced to law firms. They are then able to recruit more competitively at lower levels, to offer attractive career progression into diverse and trusted advisory roles, and to prepare their lawyers for leadership in law and business, all at reduced cost to their organisations. This is not the stuff of fantasy. It is happening today.

Where does this leave the law firms? Those that retain the traditional expertise hierarchy will find themselves unable to compete on quality and cost, and will struggle to attract and retain the best talent. Ahead of them on the curve, their clients will expect them to be operationally efficient. If they are not, clients will simply do all of their own replicable work, and will not pay law firms to employ teams of senior lawyers undertaking bespoke work in which they claim their firms are experts. They will expect firms to have scaled their specialist capabilities and to run their businesses professionally.

Ironically, law firms will be forced into the very LPO operating model they ignore today.

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