The way of the Mastodon

I was having lunch the other day with the GC of a company that facilitates internet sales. I laughed when he told me a story about having to identify an attorney who could advise him on whether there were laws that applied to the sale of Mastodon remains. (Amazing what people have in their garages, these days.)

It was a reminder of the need for technical legal experts that you can turn to for specific help. While I believe that companies will always have this need, the way that we identify and connect with that expertise is quickly changing. And, this will lead to a change in the traditional model for the delivery of legal services – the law firm.

Let me begin by asking - what is the function of the law firm? My view is that law firms serve primarily as aggregators of specialized legal expertise. The premise has been that by combining multiple legal disciplines you can provide “one stop shopping” for current and prospective clients. This structure previously made sense. If you were an individual or business with a legal problem, it wasn't efficient nor effective to try to identify an individual attorney with the technical skills that you required. So, you would turn to a law firm and rely on them to direct you to the appropriate attorney within their firm to solve your issue. The problem is that this model relies on growth (the need to add additional attorneys) to maintain profitability rather than focusing on efficiency gains. In this respect, it is at odds with what I need as a client and General Counsel.

As with so many things, the Internet is changing this business model. It is getting increasingly easier to move the aggregation function in-house. To find an attorney in a specialized area, I don't need to turn to a large law firm. Instead, I send out an email to my network of other in-house attorneys or within professional associations like the ACC and get referrals. Not only that, but I get true “customer feedback” that is more objective than what I would get from a firm. There is now a proliferation of materials available on the web – judicial opinions, legal commentary and press articles that also provide information about attorneys.

The result is that we are increasingly able to identify and engage specific legal talent directly. Here's an example. Like all large companies, we have a certain amount of employment litigation. Almost all of the large firms have strong employment law practices. But, we use a very small firm for much of this work. Why? They focus only on employment law, are very good at what they do, understand our business, get excellent results and are very cost effective. They don't have the overhead of supporting attorneys practicing in other areas.

My point is that the epoch of the current law firm model - which derives its profitability from growing scale and raising hourly rates - will soon be over. The firms that will survive and thrive are those that recognize this change and focus on how to maintain margins by focusing on efficiency. In the future, I'll describe some the things we are doing in this area, but I'll point out that we recently selected a small number of law firms to support us as "preferred partners" during the next fiscal year. We believe that these firms "get it" and are receptive to looking at new ways to drive down their (and our) cost structure. Hopefully, more firms will embrace this change. If they don't, I fear they will go the way of the Mastodon.

Posted on 12:57PM May 22, 2007 | Comments[26]

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