Reflections on the emerging Global 25: Part 2
Legal is a profession, not an industry. Law firms are different; They don’t sell widgets.
These are the theorems I was first introduced to when I started covering law practice management for the ABA Journal after graduating from law school in 1998.
I challenged the first when I saw lawyers taking stock in lieu of fees during the dot com era. Clearly the “double comma” revenue lawyers that sprouted up after a successful IPO proved being a profession and an industry are not mutually exclusive. Lawyers are in the business of making money. Revenues from legal services are estimated at $210 billion in the United States alone.
With the gap widening between the Global 25 and the rest of the law firms, it’s time to challenge the second theorem. These elite firms will get the most profitable work and will be able to cherry pick the best talent from the other firms.
The rest are going to have to compete for the remainder of the work – much of which is being commoditized. Instead of fighting the inevitable, firms have an opportunity to provide more value to their clients by finding ways to productize what they do. Law firms outside of the Global 25 will need to fundamentally rethink the way they deliver legal services. They need to start selling widgets.
By selling widgets, I’m suggesting lawyers look to productize their services in a way that better demonstrates value and is priced accordingly. Whether you call it value-based billing or an alternative fee arrangement, its about packaging legal services in a way in which clients understand what they are getting for what price.
What’s more, it may actually mean that lawyers get paid for doing less work than they would if billing by the hour. Let’s face it, the things lawyers provide that add the most value — making a vilified defendant look sympathetic or opening doors a client might not even know exist — cannot be billed in six minute increments. So instead, there is pressure to make the “stuff” of lawyering — the documents, the briefs, the filings — to be created in an inefficient way in order to create enough billable hours to make the work profitable. In the end, whether it takes 10 hours or 100 hours, the “stuff” that is produced — so long as it is right — is worth the same. Why penalize those who produce the work more efficiently?
By billing at a flat rate or on a project basis, lawyers and their firms will be incentivized to work more efficiently on the paper work and to focus their efforts on the areas that truly make lawyers valuable — their role as a strategic partner.
Why not sell the widgets and differentiate yourself on the distinct strategic services you provide?