“Inside: Going corporate”
Inside Counsel 12/02/13 By Fredrick G. Lautz
While I would never suggest I hold the key to any universal truths that would position me to speak as an expert on how any law firm, other than my own, needs to conduct its business and operations to effectively serve client needs, I feel pretty confident about making this suggestion: Law firms need to stop operating like law firms. To put it another way, we law firms need to start operating like our clients: It’s time to “go corporate.”
Don’t get me wrong. This isn’t an indictment of the way we all do business, it’s an acknowledgement that the legal industry used to operate in a relatively noncompetitive environment, especially in comparison to that of our clients. Now, we share the same key challenge of vying for a piece of a pie that’s not big enough for everyone, and we build our customer bases often at the expense of the next firm, down the street (if not on the other side of the planet!). In short, we now operate in the same competitive environment that our clients do, and that requires an entirely different operating mentality than what we are used to.
Remember when law firms weren’t allowed to advertise? Those were heady days, when client relationships were largely generational, cloistered, sacrosanct, unthreatened, and potential competitors were classless poachers. Then that nasty ol’ First Amendment opened the door wide to alternative service providers, and then the Internet globalized the market, and then the 2008 economic crash changed all the rules of client acquisition and retention. And here we are today, competing for every stitch of business we have, often on a recurring basis for each client.
What’s worse, they never talked much about this “competitive theory” mumbo jumbo in law school (and many schools still aren’t), so we venerable partnerships, collectively running our firms, are now responsible for critical business knowledge that no one, including ourselves, thought we needed to know. Across the nation, some of the most highly accomplished attorneys in the industry openly wonder how much value their marketing departments contribute to the firm’s success, or why process optimization has any bearing on the practice of law, or why creative fee structures might be important to clients, or why any client would hire another firm after having worked with us for so long. (“Don’t they understand? We’re still the great lawyers we always were! Hey, where is everyone going??”)
The simple, inescapable truth is that great legal representation is only the beginning now. In the absence of business knowledge and competitive practices that our clients take for granted, we risk being culled from the pool no matter how good we are at our chosen profession. Partnerships comprising the top 3 percent of ivy league graduates may guarantee the highest rates but not necessarily a quality of representation worth the premiums if another firm can do the same job just fine and offers more reasonable structures, better service, and other kinds of value to boot. Individual lawyers may stare down Supreme Court justices with cool aplomb, but without a basic business education they may be nothing but talented actors, not yet ready for prime time. Our abilities are highly specialized and incredibly important, but depending on them to compete in today’s industry is like owning nothing but the best hammer in the world when there’s a big stack of lumber to be cut into pieces.
Many of us, as leaders of private law firms, are bringing in consultants to conduct business seminars. Others are hiring businesspeople and giving them more authority over firm operations. At Quarles, we just sent two dozen partners through a custom-designed “mini-MBA” program, earning Certificates in Business Management from the University of Notre Dame. I don’t know who has the smartest or best solution, but I’m absolutely convinced that any firm which doesn’t get up to speed on modern business practices is dead in the water, whether they know it or believe it. Our clients’ finance departments no longer pay legal bills without asking questions. Our clients have gotten a taste of being buyers in a buyer’s market. There’s no escaping it: We have to compete like 21st-Century businesses or we’ll be 20th-Century refugees, shaking our fists at progress from the porch of some old-lawyers’ home.
Maybe, in this cutthroat world of competition, I shouldn’t be printing this advice where everyone can read it; sharing secrets of success with your competitors isn’t exactly how a business gets ahead. But operating in a businesslike fashion shouldn’t be a source of competitive advantage, it should simply be how all law firms operate. Quarles doesn’t plan to dominate the legal market by behaving more rationally in this sense than the next firm, because doing what’s necessary to survive isn’t a strategy, it’s just a beginning — first, breathe in, breathe out; then conquer the world. Sooner or later, all surviving outside firms will do the same. The free market will simply eliminate those who don’t.
Originally published in Inside Counsel, December 2, 2013