Monday, December 31, 2007

The case for collaboration among lawyers

Historically, firms grew by continually increasing their billing rates, but that strategy is no longer working. As billing rates of big firm lawyers top $1000/hour, clients (e.g., Cisco and other companies) are pushing back. The impending recession will make it even harder for law firms to raise rates. The alternative to raising rates is to cut costs by leveraging techology and existing resources. The dramatic growth and consolidation of big law firms over the past 20 years will also drive firms to implement new technologies that facilitate the sharing of common resources and improve their return on investment in both people and infrastructure. The bottom line is that big firms are getting, and will continue to get, more efficient by leveraging technology. Where does that leave the rest of us?

The problem for the solo practitioner and small firm is that it will get increasingly difficult to compete. Although the Internet is heralded for leveling the playing field, the rules of the game have changed. The new game is about having real-time, virtual, and personalized access, to people, information and tools that enhance productivity, improve results, and facilitate the practice of law. How will the solos and small firms develop these new resources?

In thinking about how to grow my own practice, I feel overwhelmed by the of scope of knowledge necessary to build a first class law firm today. Sure, I can just keep doing what I have always done: use my intellect to solve client problems. However, looking into the future and seeing the obvious competitive pressures from bigger law firms, relying on my intellect is no longer enough. There is a whole range of new technology, information, and systems that must be implemented in order to remain successful. And even as a solo practitioner (or now, in a two-person law firm), my goal is provide first class legal services, not just earn a living. How can a solo or small firm keep up?

The trend of law firms getting bigger, developing their resources, and implementing new technologies is presently at odds with the typical solo practice or small firm. Solos and small firms simply do not have the time or resources to invest in infrastructure, which disdainfully adds to their overhead. Solos and small firms are painfully aware that every dollar spent on overhead immediately reduces their available cash. The mantra of the solo or small firm is “do without” rather than do anything that would reduce their cash flow.

Here is the typical thought process of a solo practitioner. I can only generate X-dollars for my time. So, why should I reduce my take-home pay by adding to overhead? No matter how many computers or software programs I have, I still have to spend an hour of my time in order to be paid for an hour of work. Where is the incentive to invest in technology or spend time developing new systems?

This traditional mindset is a threat to the continued success of the legal profession in the United States. How can lawyers innovate, deliver better results for clients, and improve profitability if they don’t invest in new systems and technology? How will lawyers compete with the inevitable outsourcing of legal functions to virtual law firms in India, Russia or China? How will the profession respond when big law firms develop knowledge management systems that enable paralegals to perform better legal work and at lower cost than work produced by seasoned attorneys who work as solos or in small firms?

In the United States, over 50% of lawyers are solo practitioners and over 75% of lawyers work in firms with fewer than 20 attorneys (See ABA's lawyer demographics). And there is some reason to believe that these percentages are increasing as gen X and gen Y lawyers increasingly choose lifestyle over money in pursuing their career goals. How will the 75% consisting of solos and small firms compete with the 25% working in big firms? Should all lawyers just join (or become) big firms? I don’t think so. Solos and small firms fervently protect their independence and freedom to control their lifestyle as well as their style of practice. Lawyers who work as solos or in small firms need access to shared resources that enable them to develop the efficiencies of large firms without joining large firms. The answer, I believe, is collaboration.

What does collaboration look like? I don’t know yet. The legal profession, historically, tends to be more adversarial than collaborative. Collaboration is breaking new ground. And getting there means trying new things to see what works. Social networking, Internet communications, and online services hold a lot of promise for facilitating collaboration among lawyers. If lawyers generate new business through these new activities, they will naturally have an incentive to collaborate in more substantive ways. This is a phenomenon that we are beginning to see in our law practice. We started by forming an informal networking group for lawyers (and other professionals) called the “Business Lawyers Network” (BLN). Over the past three years, we have experimented with a number of initiatives that facilitate collaboration among lawyers including the creation of the website.

So far, the collaboration process has been very slow in progressing. However, I am very encouraged by the results. Many BLN lawyers have generated new business by participating in the various networking events and by sharing their knowledge and information on the website. And, based on numerous anecdotes from BLN members, these collaboration efforts have improved lawyers’ satisfaction with the profession. One lawyer commented to me that he was re-energized and, for the first time in years, he was enjoying being a lawyer and building his law practice.

How can collaboration help to grow your firm? In what ways can and should lawyers collaborate?

[This is the first of, what I hope will be, many articles about collaboration among lawyers. I'd love to hear what other lawyers thoughts are on this subject and encourage readers to post their comments on this blog.]


Art said...

"75% of lawyers work in firms with less than 20 attorneys"

should be "with fewer than 20 attorneys" :-)

Stephanie Kimbro said...

Online collaboration is so important for the solo/small firm attorney. I personally would like to see more collaboration of attorneys by state.

I practice law from a completely virtual law office (web-based, SaaS) so my clients come to me online from all over the state where I am licensed to practice. It would be great to have a network of virtual solos and small firm attorneys who were able to collaborate online with each other to assist clients and make referrals to those clients that needed to meet face-to-face rather than online. Right now I end up referring clients to the state bar referral service if their legal matter requires a full-service law firm in a county that could be hours away from me. I'd rather establish online relationships with other solos and refer to them.

Pankaj said...

You might want to take a look at an article i wrote on collaboration technologies for lawyers -