David B. Wilkins, the Lester Kissel Professor of Law at Harvard Law School, recently sat down with Legal Executive Institute and discussed the state of the legal marketplace, whether fears for its future health are genuine and whether new metrics are needed.
LEI: One thing we’ve seen in recent industry financials is that the legal market is becoming even more stratified than ever before. Do you expect this to continue?
Wilkins: Definitely. The top of the top is moving away even from the rest of the top, let alone from the middle of the top. Now, some firms will continually try to chase the top 1%. The problem with that is there’s only space for 1%. There’s not going to be space for a huge number of firms to occupy that very top, elite rung. Those firms are visibly now trying to put even more distance between themselves and the next rung by raising salaries in a way that other firms will not possibly be able to afford.
They’re just going to put the hammer down, and they’re going to try to drive space between themselves and the next tier to attract talent in a way that they hope will be reinforcing to their top-tier strategy. Some of them will be very successful—I have no doubt about that. Then you’ve got firms that don’t quite make that and they’re going to have some big decisions to make.
LEI: Still, a lot of law firm leaders are talking about the need to undertake drastic change, but what change is actually being undertaken seems slightly removed from the crisis.
Wilkins: I would agree with you that there’s a mismatch between the rhetoric of crisis and what the actions are. My own sense is that’s due to a couple of things. One is, quite frankly, some of the rhetoric is overblown. Yes, there are important changes going on, and those changes are going to accelerate, but there are those people who say it’s the death of Big Law or even more apocalyptically, that it’s the end of lawyers… it’s unlikely to be those.
Therefore, some people are reacting against that, to say, ‘Well there are going be changes, but it’s not going to be that drastic.’
LEI: Do you believe that?
Wilkins: The structure of law firms make it very difficult for them to adapt to the real changes that are going on out there. Most firms have a very decentralized decision-making structure, even firms that are highly managed. The individual partners control the most important assets, which are the clients and their teams.
Further, law firms have a very difficult time with strategic planning or investment in things like research & development or new technology because they have a business model in which they have to pay out all the profits at the end of the year, which makes it very hard to invest for the future.
Quite frankly, lawyers have a very traditional and conservative mindset that makes it hard for them, both to fully grasp the changes that are happening and then to embrace more radical approaches to confronting them.
LEI: Still, these pressures are real and mostly are coming from clients who themselves are under pressure to cut costs and get more for less from their legal buys.
Wilkins: That’s right. General counsels are being pressed to cut headcounts, being pressed to cut legal spend, being pressed to justify what they’re doing in terms of increasingly hard metrics.
The clients are way more sophisticated than they ever have been before about what they want, when they want it, and how they want it. But more for less doesn’t actually just mean cutting costs. It means improving quality.
LEI: But how do you quantify that in terms of legal services delivery? How do you quantify the better?
Wilkins: This is the $64,000 question, as we used to say when that was a lot of money. The thing that will tip the balance is when people develop better and more objective and quantifiable metrics of quality. Some people say it’s impossible to have this, and that’s just obviously false. We measure all kinds of things that are difficult to measure in terms of their quality, we just haven’t spent very much time trying to develop those metrics in law.
It’s going to begin by people collecting the vast amount of information that they have already and that is easily obtainable about legal results and the connection between who you hire, how much you pay them, how many hours they work, and what actual results the client gets—like as crudely as whether you win or lose; but more sophisticatedly, like how much time did it take you to win or lose? What were the opportunity costs? What were the long-term effects of entering into a particular deal? How many problems were generated by the transaction that was closed by one law firm versus another?
There are a lot of factors that make this calculation difficult, but people make difficult risk assessments all the time. And that’s coming to law.