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Digest 18

We are glad to present you the 18th issue of the St. Petersburg International Legal Forum Digest!

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News of the Forum

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If you are interested in a list of participants please visit Delegates include. Today we are glad to introduce one of the Forum’s participants - Renaud Sorieul.

Renaud Sorieul is the Director of the International Trade Law Division (ITLD) of the United Nations Office of Legal Affairs, which functions as the substantive secretariat for the United Nations Commission on International Trade Law (UNCITRAL). He is the eighth Secretary of UNCITRAL. He took up his duties on 1 October 2008.

Since he joined the UNCITRAL secretariat in 1989, he was actively involved in the UNCITRAL Working Group on International Payments, which prepared the UNCITRAL Model Law on International Credit Transfers. He then served as Secretary of the UNCITRAL Working Group on Electronic Commerce, which drafted the UNCITRAL Model Law on Electronic Commerce and the UNCITRAL Model Law on Electronic Signatures. Since 2002, he was the Secretary of the UNCITRAL Working Group on Arbitration and Conciliation. Since 2005, he was also the Principal Legal Officer, Head of the Legislative Branch of the International Trade Law Division.

Mr. Sorieul holds degrees in private law from the University of Paris (Paris II). He is also a graduate of the Institut d’études politiques de Paris and the École Nationale de la Magistrature. A member of the French judiciary since 1981, he served as a magistrate in first-degree law courts (1981-1985), and was subsequently appointed a member of the International Criminal Law Division at the Ministry of Justice (1985-1987). He was then seconded to serve as Head of the Legal Office of the Directorate-General of Energy and Mines, at the Ministry of Industry (1987-1989).


Innovation, Project Management, and KM in the Newly Competitive Legal Market

The continuation of the article of Ron Friedmann

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The continuation of the article of Ron Friedmann, a lawyer by training who has spent over two decades working in the legal market. He has extensive experience as a legal market consultant, senior manager in large law firms (CIO at Mintz Levin and practice support at Wilmer Cutler), and marketing professional at two legal market software companies. Ron currently works at Fireman & Company, a legal industry-focused management consulting firm, as well as blogging on his professional website, Prism Legal Consulting.

Going back to when you said it’s important for the in-house lawyer and the client to, not necessarily track everything, but to say why things don’t go as they were planned to – essentially holding them to account. How important do you think it is that clients are able to say, “Why is this happening with this firm, and Innovit’s not happening with this firm?” and that it’s a matter of trying to bring the relationship power back to the client so that they can say, “Well, if you’re not doing this as we want it to be done, we can go elsewhere”?

I think you are asking are a couple of questions here: (1) can we compare performance across firms and (2) if we can, what should the client do with that information.

In my view, clients have done a poor job of cross-firm performance evaluation. Years back in my blog posts I wrote about e-billing, specifically my disappointment in it. At best, it applied some simple mechanical rules. For examples, you could have two associates at a deposition and the engagement letter only allows one, which is fine – there’s nothing wrong with that – but the data were not being used by in-house counsel to analyse the cost-effectiveness of firms. If you collect a lot of data, whether it is through an e-billing system – and they’ve been around for quite some time – or it’s through project management, there’s a question of, “Can you do an analysis across your firms to try to assess which are more efficient?”

It’s a worthy exercise. I don’t think it’s easy, but I think it will yield results with dedication. It’s a type of dedication that I don’t see very many law departments having. I’m not sure there has been enough of this analysis to even answer the second question concerning what clients do with the answers.

But e-billing is the rear view mirror. Looking out the windscreen is project management. I think it’s incumbent on in-house counsel to monitor the work that their law firms do, and more importantly, to be the voice of the ultimate business client as to the appropriate risk-adjusted decision-making and query whether clients are giving clear instructions about how much work to do.

It goes back to, “How much legal research do I do? How much discovery do I do in a contentious matter? How much due diligence do I do in a deal? How many documents or how many provisions are there in the contract?” GCs must make these decisions explicit to outside counsel; the GC, in turn, must get clarity from the internal client.

I will go a step further to say a word about a theme I’ve recently developed, namely, “Can We Do Less Law?” The cost of lawyering is quite high so clients must ask what is the risk against which I’m protecting and how do I make a decision so that it’s not just that I’m doing the work efficiently, which of course is important, but also that I’m doing the right amount of work.

Doing the right amount of work depends on your appetite for risk. It’s reasonable to say in some instances, “We don’t need a lawyer for this at all, so don’t do a project plan, just don’t even engage a lawyer for this, because we’re willing to take the risk.’” Project management helps with that, but you need a clear way of making risk-adjusted decisions consciously and not just keep spending with a false sense of comfort that says, “Because now I can see how the money’s being spent, it’s okay”. The GC must ask, “Should I be spending that money in the first place? And only then, ask if it’s being efficiently spent?

I guess this ties into how there is less business now because clients are looking to go to external counsel less and because there’s these changing models and so on. But as you also said at the start, there’s a resistance within law firms to change the model, because, as various people have said, including Richard Susskind said at a conference recently, “It’s quite hard to convince a room full of millionaires that they’ve got their business model wrong”.

There are fewer new millionaires being made in law firms right now, so I think that’s what will eventually lead to change. We had a period until 2008 in both the US and the UK, and Australia as well, and Canada, when it didn’t matter what lawyers did. If you were a decent lawyer, and you provided an okay service, you got a lot of business, and you could do quite well, thank you.

Now we’re seeing firms letting go of partners, de-equitising partners, and at some firms I think they will find it hard to keep up profits. They are constantly worried about losing their rainmakers, so the lateral partner moves have increased, so that does create some pressure among partners.

There’s also an intergenerational gap, given the nature of partnership structures where partners of a certain age, say 50, 55 or 60, thinks they can hold on for another five, ten, fifteen years before things really change. Those who can see retirement may not be motivated to make changes.

But if I’m a new partner and I’m in my mid or late-30s and I have twenty plus years left in my working career, I might look at the world and say, “This isn’t going to last – we’ve got to change”. But do the younger ones have the power in the firm? And how do you resolve the motivations of junior partners with the motivations of senior partners? Not easy.

In reference to the ‘room full of millionaires’ – I think David Maister said it originally – the only way partner profits have been kept steady is by de-equitising partners, and there’s only so far that can go. Even in firms where they’ve de-equitised partners, if demand remains flat, if costs continue to go up, if price pressure continues, then they may not be millionaires forever. But hope also springs eternal, so it’s still a challenge.

Finally, in terms of Knowledge Management, what do you do with Fireman & Company in this regard, and how important is Knowledge Management now? How much does that tie in with Project Management?

Of course I have some bias – because I do quite a bit of work in Knowledge Management – in thinking it’s important. With the push towards Alternative Fee Arrangements, especially with fixed fees, I think there’s more interest in Knowledge Management, because, as firms face pressures to reduce costs for more value, being able to capture know-how and re-use it effectively, becomes much more important. We’re seeing more firms asking for help with Knowledge Management strategies, asking for help with the process and the technology around it.

There is a bit of a difference in this between the US and the UK. The UK still has a larger population of professional support lawyers than the US. The US has favoured automation, so you’re seeing more and more firms adopting enterprise search as a primary technology for solving some Knowledge Management problems such as finding work product or locating experienced lawyers. Some firms will bring that forward even further to converting that know-how into more crystallised know-how that can be delivered on an interactive expert system directly to clients. I think that it bodes well for Knowledge Management, as one of the moving parts, that helps law firms deliver higher value.

As to the connection with Legal Project Management, it’s more through the people, at least in the US and in Canada. A lot of the people who are driving Legal Project Management in the US and Canada turn out to be the Knowledge Management professionals. I have my hypothesis for that but they’re not inherently related disciplines. If you’re putting together a project plan and you have Knowledge Management resources that may allow you to do many of the steps in the project plan at lower cost, there’s a connection, but that doesn’t really tie them together. It’s more that the people doing Knowledge Management have skills in multiple disciplines, they’re often lawyers or people who have worked enough with lawyers that they know how lawyers work, they know how lawyers use technology, they know quite a bit about how the law firm operates and institutionally they are best positioned to start project management initiatives.

Many of the KM conferences are still called KM conferences but they’re as much about project management, if not more about project management and more about pricing and process improvement, as they are about traditional KM.

These multi-skilled Knowledge Management people who may be lawyers or may just be people who’ve worked a lot with lawyers, do you think they’re going to be very important in this new era of law where – especially with in-house lawyers – things like Knowledge Management and Project Management and the use of technology in different ways are so important?

Yes absolutely. We’ve moved from an era where – and this goes back to the competition and the change in the market – arguably until five years ago, it was enough that you were a good lawyer and that you delivered good legal results and an okay client service. That was all that was required to be successful and stay a millionaire, to put it back into that context. Today, with all the pressures and the drop in demand and the need for firms to differentiate through innovation, it’s not just the legal skills that matter. Clients assume within a range of law firms that they will find skilled practitioners who will deliver good legal results, so now they’re looking for better management, better process, better value – and the value may be lower cost, it may be access to a KM resource, the value may be secondments. The value may be that the lawyers they deal with actually know about their companies and industries in greater depth than they did in the past.

And doing all those – and I hate to call them “extras”, because that’s how lawyers think about them, but doing things that other businesses, other organisations, have long taken for granted as part of their core service – making that part of the core of the delivery of legal advice is critical. And that’s often comes down to people who know about the law but are not necessarily lawyers. In fact, there was just a recent blog post by another consultancy that talked about recruiting talent in the new era saying law firms have to get much better at recruiting professionals who are not trained as lawyers to help with all the other parts.

The quality and skill of law firm staff has certainly improved in the last twenty years, which is the good news. If you go back to the 1980s, IT directors were often secretaries who knew the most about word processing, directors of finance were often bookkeepers who becames heads of finance. Today in those areas you often have CIOs with very heavy duty IT backgrounds, you have finance people who are typically CPAs, and you have marketers from outside. Those changes are not directly related to what we’re talking about – but they suggest an increasing number of new professional disciplines within law firms. Successful law firms will need a new cadre of professionals not just to operate the firm, but as core to the delivery of legal services in a way that satisfies clients.

© 2014 Ron Friedmann. All rights reserved.


Coming in the next issue:

The next issue of the Digest to be launched on 11 February will feature a new column on events and trends in fashion and style with a legal focus, as well as will keep you informed about the V SPBILF news.