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He's Talking 'Bout a Revolution
Who would have thought that a lawyer -- and an in-house corporate counsel, at that -- could lead a revolution? If, like me, you're a skeptic, take a look at this speech by Cisco GC Mark Chandler at the Northwestern School of Law's 34th Annual Securities Regulation Institute, because 'dems fighting words.
Chandler has a couple of messages for law firms. First, he speaks directly about how technology is changing the way in-house lawyers practice, as well as implicitly about how high law firm rates are driving in-house decisions. Among other things, Cisco has created an online contract builder so that its employees around the world can create NDAs and standard contracts. And Cisco is also working on a wiki with other Fortune 500 companies to allow direct access to firms' knowledge management systems on securities regulatory compliance. Finally, Cisco "got tired of high billable hour rates from so-called global law firms," so it's selected a firm (which isn't a huge global firm, but open to new ideas) to help it address issues related to corporate secretarial matters. And while Cisco uses two large firms for M&A work and litigation, those firms operate on fixed fees.
The bottom line is that in an era where information wants to be free, corporations want access, and they don't want to pay for every minute spent to find it:
The legal industry has spent millions on IT to up speed access to
information. But the only way I can get that information is through an
individual billing me by the hour. My in-house team often has more
sophistication than the associates who mine the knowledge management
system to generate a memo. We’re just not allowed to access the
information without paying for someone’s time.
The systems exist today to change the delivery of legal information
to clients. But that change would challenge a model that today delivers
high profits. Every big company, including Cisco, is using those
systems to make our support services more effective, and to drive down
the costs of providing service. Law firms are not. Clay Christensen of
Harvard Business School has written, and I quote, “Large American law
firms are just about the most profitable businesses in the world.
Speedier information-gathering capabilities allow large law firms to
increase utilization of less experienced lawyers without passing cost
savings on to their customers.” So changing the service delivery model
will be disruptive, and not just because associates are kept busy doing
work that a machine might be able to do better. Changing that model
will also cut into the effectiveness of cross-selling. From a client’s
point of view, cross-selling is an effort of star partners to leverage
the loyalty they have earned to drive hourly work to other parts of the
firm. Today, there is little incentive for law firms to apply
risk-reward logic to the amount of legal services provided. And General
Counsel know that.
In the scheme of the profession, will large firms eventually become extinct and go the way of the "medieval guild system," to quote Chandler? Or are they up to these new challenges? What do you think?
Posted by Carolyn Elefant on January 30, 2007 at 03:31 PM | Permalink
| Comments (1)
Comments
Wow, do I ever agree with this guy!
The hourly rates that attorneys in private practice are demanding never cease to astonish me. Recently, a colleague whose wife left him went looking for a divorce lawyer. He interviewed one in Doylestown, the county seat of Bucks County, north of Philadelphia. She quoted him $350 an hour... in Doylestown, not even downtown Philly.
In my experience the big firms also only want to sell us a Mercedes or a Beamer, when many times all we need is a Dodge Neon. By that I mean that they tend to want to turn their young associates loose to travel down every legal-research rabbit hole, leaving no stone unturned enroute.
I guess it's a lot like doctors ordering every imaginable test. It's a winning formula for them: the profession makes more money while guarding against malpractice claims later. Can't blame them.
But of course we in-house grunts can't be blamed if we look on these "legal services" with a healthy degree of skepticism.
The real wonder to me is that, while generating all these fees, so many of the attorneys I meet in the big firm world --- I'm still welcome at the major Philly firm where I used to wear a pledge pin --- are intensely dissatisfied.
When I first joined that firm some 25 years ago, the money was nearly as good, but we had a lot more fun.
Jim Castagnera
Associate COunsel
Rider University
http://castagnera.wordpress.com
Posted by: Dr James Ottavio Castagnera | Jan 31, 2007 5:00:21 AM
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