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5.12.20 & 5.15.20: COVID-19 Crisis Series - Joint meeting of LAW FIRM and CLIENT-SIDE Luminaries

As its first topic of focus, the Council of Luminaries has decided to have regular meetings to discuss the effects of the COVID-19 pandemic on the legal industry as they materialize. The objective is to identify developments in the market, at their firms/companies, and within their teams, and to explore potential solutions and make predictions on where things go from here.

During the week of May 11, we deviated from our standard schedule of a Client-Side call on Tuesday and a Firm-Side call on Friday, instead hosting two calls combining the groups. We split into two calls so we wouldn’t have too many participants for a conversation and each member self-selected which meeting to attend.

While, as always, which Luminaries were in attendance and who said what remain anonymous, we have denoted which type of Luminary made each. The notes below are a digest of the comments and discussion that took place between the 2 calls.

This Week’s Temperature

On Tuesday, May 12 we had 8 Law Firm Luminaries and 6 Client-Side Luminaries.

We started off the meeting with a simple question for all: on a scale of 1-10 with 5 being your pre-Covid level, how much pressure do you feel under these days?

None of the responses were lower than 7.

Pressure from All Sides

Firm: Firms are experiencing different levels of sensitivity and pressure. Our firm did not get an immediate tsunami of clients coming to us, likely because we don’t happen to have a lot of clients in the hardest hit industries. The good news is that many partners are being a lot more cognizant about the need to embrace new ways of doing work and new ways of communicating with clients.

Client: We are seeing some spikes of work in areas that haven’t been as affected in the past. And while the pandemic may make things more difficult, our leadership has made clear that our performance cannot be compromised despite the circumstances.

Firm: We have received requests for concessions and our team is supporting those, including having our LPM team work on additional ideas to work more efficiently. We have recently seen some surges in sectors like labor & employment, construction and real estate and are supporting those teams. Even when there hasn’t been a reduction in work, we’ve needed to cut costs.

Firm: Furloughs are a big driver of some of the pressures, and some members of our project management team have been furloughed, which has lowered our capacity. At the same time, we’ve seen a surge in demand for help with KM to help our attorneys react to the crisis and respond to client needs.

Firm: We have also been proactive on furloughs, including one member of my team; plus some expected hires have been canceled. This has put some particular pressure on us, as the innovation function is now under capacity, possibly at jut the wrong time.

Firm: Having clients in hard-hit industries creates challenging situations. Year-end creates additional pressures, and projections for next year are extremely difficult to make now.

Client: For clients in industries not being hit, are you reaching for discounts? Shouldn’t we be helping our firms?

Client: We have been doubling down on innovation and AFAs rather than asking for bigger discounts. We are always under pressure from finance, regardless of whether company is in dire financial straits. Law remains a cost center and all are being asked to help boost bottom line, as always.

Diversity & Inclusion and Other Clearly Stipulated KPIs

Client: What are clients doing to ensure we are not damaging D&I progress?

Client: We put reciprocity in the D&I statements in our outside counsel guidelines to help take this opportunity to build. Commitments must be adhered to, but we try to unify and align.

Turning Crisis into Opportunity

Client: Are some clients taking an opportunistic approach and just likely taking advantage of the crisis? Are more clients openly requesting partnering initiatives with their firms?

Firm: There’s been a lot of talk about partnership. When we all look at legal spend, it has to be considered a cost and an investment; it may be necessary to increase spend in some places. Reallocating work by priority can be an opportunity, but we need to acknowledge that there are infrastructure costs to put services in place and sustain them and we all need to work within those parameters and ensure we are still collecting enough revenue to ensure service continuity.

Client: How can a client not simply take advantage and instead help support evolution? If infrastructure investments are made, how do you demonstrate that and show clients the benefits they get from it?

Firm: Infrastructure is about not just bricks and mortar but also people. Some delivery tools must continue to be invested in, but some areas, like subscription costs, are under scrutiny. We need to balance short term pressures with what we need or can create longer term.

Communicating Innovation

Client: How much credit are your pricing/innovation teams/etc. getting for investments that are differentiators for the firm?

Firm: It varies a lot by client and especially partner. It really hinges on whether or not there is direct adoption of services and use, and even more if there is client-facing exposure. We should do a better job of letting our clients know all the things behind the scenes that are happening that are making them have a good experience. Not all partners do a good job on that as their view tends to be focused on the legal services rather than the business services.

Client: Does a client care enough to insist that firm provides these capabilities in connection with their work? And do the performance criteria include those additional benefits and not just good legal work? Firms need to do a better job of articulating the value message and proposition: “We invented this new tech” doesn’t mean much, but partnering and showing what the impact is of those changes is the key. But how do you get the right person’s attention and boil down how we can deliver additional value?

Firm: Are partners and lawyers the right people to be engaging in the value creation discussion with the client?

Client: We need more non-partner professionals to help define and communicate benefits and value.

Firm: Some firms are evolving to more of a corporate-type operational model, with partners having less ability to go out and do what they want (or not do things they don’t want to because they don’t understand them). Today, many firms’ approach is: “this is the brand, these are the communication expectations, etc.” They do not allow partners to do a pricing or value add proposal without at least looking at what innovation can be included. They are working to incorporate the respective functions within the firm into the presentation and value proposition, rather than relying on the partner to determine what to tell them.

Client: Are others seeing that? Firms incorporating multiple functions into the client relationship at the enterprise level, rather than at the individual level. Are other firms approaching things that way?

Firm: Yes, but taking an enterprise view to problem solving is a very different operating model that is more common in other types of professional services firms. What do we need to know about what client is facing or prioritizing so we know how to mobilize around it? It’s a huge cultural change and a very different value proposition than most partners know how to embrace—historically the primary focus has always been on the individual legal work being done. In this environment, it’s critical to the client’s understand pain and also its drivers and strategy.

How Can Clients Help?

Client: What can clients do to help firms better respond and assist? Are clients being transparent about their pain and being honest in non-hit industries? Do we need to be forthcoming about what’s going on internally?

Client: When firms are pitching clients, are they thinking about only what they services pitch, or about how to proactively help the clients? Not all clients are as sophisticated to understand all dimensions of their issues or needs. Some need more insight from outside their borders that firms can bring to them based on work being done for other clients.

Client: Not enough lawyers stretch and talk about things in areas that are not their lane, and often won’t go on-site prepared. Those that are most effective will know the client’s needs and how to speak to the things that resonate. Different firms do it differently—sometimes only partners are client-facing, sometimes other people are more involved.

Firm: Often it depends on the partner. Some partners don’t even want to introduce other partners; it’s partially because of how they are compensated. Controlling the relationship ensure portability if they want to leave the firm at some point.

Firm: When an RFP asks the firm to communicate these types of services as critical to what the firm delivers, that gets us (the business professionals) to the table. And from there we can help design the solution and incorporate it into the RFP. That gets the partner to need us at that meeting. Making sure that language is in RFPs is something clients can do to help.

Firm: Clients can ask for the value team to be involved and the partners will bring them. Anything a client asks for will have 100% better chance of showing up on their doorstep than if left to the interpretation of the partner since there is widely varying levels of understanding about what many of the business services can do for their clients.

Firm: It’s important that the clients are articulating the need for these types of services. They need to emphasize that they want people at the table who are not necessarily legal subject-matter experts, but are engaged in delivery.

Client: We on the client side need to help you on the firm side. It resonates when a firm pitches itself as a brand with a complete approach. Too many times there are miscommunications within firms themselves. Sometimes the same firm will even respond multiple times to the same RFP, each led by different partners. Firms should get together and think about what their brand and value proposition is when approaching a client.

Firm: That corporate approach wasn’t something people invested in 12 years ago. Lawyers who are now partners didn’t come up as part of what they viewed as a global enterprise, and that’s a big paradigm shift.

Firm: That may be true, but they need to have a knowledge of what’s going on and what offerings you have available. It repositions the brand. There are compensation issues that sometimes don’t incentivize these shifts and further complicate the issue.

Firm: One of the keys for a law firm innovation team or a firm-side legal ops team is not giving the impression that the lawyer is going to be burdened with addition cost or frustrations if they engage these teams.

Firm: Clients continuing to emphasize that these things are important to them will help drive firm culture to leverage specialization of labor and bring in business folks.

Client: It’s important for clients to help firms overcome these issues and develop a more corporate approach to operating the firm so it can present a complete, holistic view of the value and offering. The way we ask for what we want, and remain committed to it being included in what is presented to us, is within our power to do.

May 15 Call

On Friday, May 15 we had 6 Law Firm Luminaries and 7 Client-Side Luminaries.

We again started off the meeting with a simple question for all: on a scale of 1-10 with 5 being your pre-Covid level, how much pressure do you feel under these days?

Remote Work is Erasing Geographic Lines

Client: Some things that previously were “nice-to-haves” like DocuSign are now hot topics—and are an easy quick win toward progress based on circumstances. Also “remote” as a concept has been accelerated: work at our company has continued without a blip based on preparations/practices put in place, and leadership has taken notice of other ways to leverage that and scale it. These “nice to haves” are being elevated into more compelling propositions now.

Firm: Similarly, remote work has lowered barriers to some things like DocuSign and we are seeing more geographic collaboration. We can better facilitate relationships building across the firm as opposed to across the hallway because geographic borders are now somewhat arbitrary.

Firm: We are seeing openness to thinking beyond local offices.

Firm: Our firm compensation structure has promoted borderless work, but being forced to work remotely has forced other ways of collaborating via tech that has further supported these efforts.

Changing Legal Service Delivery Models

Client: Have service delivery models changed just because of COVID? Are we aspiring to new models? Is work adapting to the new environment in the long term or just during the crisis?

Firm: Firms—or more specifically, partners—tend to like the status quo because it’s always worked. Now they are being forced out of it and seeing that things can work differently, which has had a positive influence. We are just two months into it and have learned a lot. I think these changes are likely to stick to some measurable degree.

Client: Is LPM and pricing being elevated at your firms and influencing things more? Is communication changing?

Firm: The conversation has changed a lot and now includes more of these communications and transparency considerations that have helped highlight importance of our functions.

Firm: Things that have been delayed for a long time on the business process/LPM/reporting/collaboration front has become more interesting to internal firm stakeholders. For the first time, it’s been more of a pull than us pushing.

Client: Staff reductions of pricing/LPM staff at firms have been scary to clients because we don’t want to lose the operations/businesspeople who drive the relationships. These former “costs” are now much more revenue-drivers for clients with centralized operations teams.

Client: For firms, now is the time to demonstrate your value. Clients appreciate firms being more open to partnering with ASLPs, for example. “Come to me with solutions not promotional programming.”

Client: Is the move toward new engagement models episodic or institutional in nature? Do we think there is a shift in culture now to promote alternative service options, or just pet projects.?

Firm: The intent is institutional but in reality, there are still some hold outs and there is not a rigid enforcement across all practices. Law firm culture and power dynamics are very different from corporations due to the decentralization of authority, preferences and incentives that a partnership imposes on the environment. Simply building a capability that should support the business does not ensure it will be leveraged (or even understood) as many partners are so immersed in their own work and clients that they aren’t processing the developments going on around them.

Some Practices are Riper than Others

Client: Are certain practices more open to innovation now?

Firm: Absolutely. At our firm, the IP group is interested because they have pricing pressure and those lawyers have scientific backgrounds. Also, we have a lot of tech clients and start-ups, and the lawyers who deal with them are interested. But others will keep doing what they’re doing; and sometimes for a good reason.

Firm: It’s harder to inject new things into some practices. Regulatory, for example, is very hard. Litigation depends: high-stakes litigation is harder to get good foothold into, but class actions or portfolios are easier. M&A is hard other than little pieces, but transactional practices with scale are easier.

Clients: Product liability is a ripe area based on nature of MDLs and scale of work to be done. Building shared platforms are a huge opportunity and there is a lot of repeated work product available to be done. M&A is ripe for innovation because of repetitive aspects of it, for example with AI assisted review.

Client: M&A is the next target for innovation. It’s actually similar to e-discovery: get data, organize the data, review it systematically. There’s no reason not to pursue this. End-to-end leveraging of smart technology should be emphasized. Our law department is going to develop our own internal playbook that will take decisions out of firm’s hands.

Client: One potential impediment to innovation in M&A is that sometimes our business clients who do M&A don’t really care about the cost savings because the deal costs get capitalized anyway.

Client: We’ve actually found that innovation can get a lot stickier with the client looking at the relationship holistically at that moment. Capitalized transactions actually offer us an opportunity because there is not as much concern about budget so we can test new things with lower risk.

Client: One question is will receptivity change when the nature of M&A changes. The downturn is likely to result in companies’ trying to buy on the cheap; so maybe lower transaction costs become more important so that fees are disproportionately high percentages of the transaction value.

Impediments to Adoption

Client: With some of the offerings that firms have for clients, what are some of the disconnects that stop them from being implemented? What can clients do to assist?

Firm: Lawyers are usually the impediment, both at law departments and at firms. They like the way they do it and need an impetus for change.

Firm: Fear of the unknown is a big part of the disconnect. We often attribute it to arrogance, but sometimes it’s fear. Innovating also means having to engage with other areas of the firm like IT and they are reluctant because they often don’t know exactly what they do or how it applies to them, and don’t want those teams in front of their client. Also, some tech is not really proven so there’s an aversion to trying it.

Client: The first time out of the gates on tech projects is never clean, so we need to be honest on the front end about setting expectations and emphasizing that it’s a development process. Also, we need to be clear that not everything requires A+ work and often a B is more than sufficient.

Client: We’ve even been able to use some common business tools rather than pushing new tech; repurposing existing tech can give us a foothold. For example, we’ve used to generate performance metrics on firms and give them access to it. We chose this over a specific collaboration tool because we already had a companywide license to Salesforce. Our firms get much more information, and we are able to use a tool we already own.

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