Avoiding Extinction: Reimagining Legal Services for the 21St Century

Avoiding Extinction: Reimagining Legal Services

for the 21st Century

Copyright © 2012 Mitchell Kowalski.

All rights reserved. No part of this book may be used or reproduced by any means, graphic, electronic, or mechanical, including photocopying, recording, taping or by any information storage retrieval system without the written permission of the author except in the case of brief quotations embodied in critical articles and reviews.

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ISBN: 978-1-4917-9315-2 (sc)

ISBN: 978-1-4917-9316-9 (e)

Library of Congress Control Number: 2016905462

iUniverse rev. date:   04/20/2016

CONTENTS

Acknowledgements

Preface to the Original Edition

PART I

Chapter 1 Maria’s Dilemma

Chapter 2 Six Months Earlier

Chapter 3 BFC Presentation Day

PART II

Chapter 4 BFC’s New Hire

Chapter 5 Avatars and KM

Chapter 6 Lunch with Bowen

Chapter 7 Coach Kwan

PART III

Chapter 8 Bowen’s Swan Song

Appendix A Kowtor Industries Outside Counsel Expense and Disbursement Policy

Appendix B Some Ethical Considerations for Law Firms Using SaaS and the Cloud

Appendix C Suggested Reading Material

Endnotes

For Maia and Max

The illiterate of the 21st century will not be those who can’t read and write, but those who cannot learn, unlearn, and relearn.

— Alvin Toffler, Rethinking the Future (Rowan Gibson ed., 1997)

Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.

— Warren Buffet, quoted in Mary Buffett & David Clark, The Tao of Warren Buffett (2006)

The tone at the top determines the tune in the middle.

— Yilmaz Argüden, Measuring the Effectiveness of Corporate Governance, Insead Knowledge, April 15, 2010

If you don’t want to be the horses’ hoof prints, you got to be the hooves.

— Bruce Cockburn, Incandescent Blue, on Dancing in the Dragon’s Jaws (True North Records, 1979)

ACKNOWLEDGEMENTS

My thanks to Joanne Horibe, MaryLee Farrugia, Jordan Furlong, Tim Brandhorst, and the ABA anonymous readers for their comments on early drafts of this book. Thanks to Mike Greidanus for his comments on procurement and to Thomas Pastore at Guardian Industries for sharing Guardian’s expense guidelines. Discussions generated by the class and instructors of the Association of Corporate Counsel’s Value-Based Billing Program held in Washington, D.C., on July 13 and 14, 2010 were extremely helpful as were those discussions at the Directors Education Program jointly run by the Institute of Corporate Directors and the Rotman School of Management at the University of Toronto, and discussions at the Integrative Thinking Program run at the Rotman School of Management. Thanks also to the writers at Toronto Writers’ Centre who gave me constant encouragement, especially Ania Szado. Big thanks to Roz Spafford for her many editorial comments that helped make this a better book. And finally, special thanks to my beloved wife, Yvonne, for all your love and support.

PREFACE TO THE

ORIGINAL EDITION

Avoiding Extinction: Reimagining Legal Services for the 21st Century is based on a cover article I wrote for the July/August 2009 issue of a Canadian legal magazine called National. Since that time, the legal profession has made some minor evolutionary changes yet remained maddeningly the same.

We now live an era of innovative legal entities such as Clearspire and Axiom, online documents provided by LegalZoom, publicly traded law firms like Australia’s Slater & Gordon, legal process outsourcers like Pangea3. It is also an era where alternative business models in the United Kingdom are creating franchise law offices in retail shops, yet most law firms around the world still practice law the way it has been practiced for centuries; a labor-intensive endeavor carried out by high-priced personnel billing by the hour. Protected by legislated monopolies, law firms have been allowed to grow complacent, fat and inefficient.

While it is hard to pinpoint the first moment at which businesspeople and some lawyers began to question the old, established way in which law has been practiced, certainly one of the first writers to challenge the notion of law firms as unassailable purveyors of legal services is Richard Susskind. His most recent book, The End of Lawyers?, has become the source of new thinking about legal services delivery. Susskind’s book contains a wealth of fresh ideas about legal services delivery; however, the most profound takeaway in his book is the following:

Law does not exist to provide a livelihood for lawyers any more than illness exists to provide a livelihood for doctors. Successful legal business may be a by-product of law … but it is not the purpose.

For me, these sentences are at the core of all my thinking on innovation in law. And it will not surprise readers that these sentences are also at the heart of Sylvester Bowen’s innovations at BFC. What has been lost on many within the legal profession is that the ability to deliver legal services is not a right, it’s a privilege—one that lawyers must earn every day. If lawyers do not earn that privilege, clients will turn to other service providers.

I thought highly enough of The End of Lawyers? to include it as part of the curriculum of an LL.M. course I was teaching at Osgoode Hall Law School in Toronto in early 2009. My students—a mix of new and older lawyers—had predictably mixed emotions about the book. Some were quite guarded about their right to exclusively practice law while others welcomed innovation particularly in more commoditized areas of law such as real estate. Shortly after I finished teaching this course, Richard Susskind arrived in Toronto as a stop on his book tour. His book was politely received by many lawyers in Canada, then promptly put on their bookshelves—unread. The lack of innovation and thoughtfulness in Canadian law firm operations continued without missing a step.

Inspired by The End of Lawyers? and astounded by Canada’s lack of enthusiasm for Susskind’s book, I wrote my piece for National. It was crafted as a speech given by the managing director of a fictitious law firm in which she explained the success of her law firm. The feedback I received on the article, particularly from young lawyers, indicated that there was an entire generation of lawyers who were dissatisfied with how their firms were practicing law. Several readers told me that they were fooled into believing that my ideal law firm really existed and sought to apply to it—until they came to the conclusion of the article. As a result, I decided to flesh out my thoughts about the law firm of the future in book form—to show law firms what they would look like if they recreated themselves to provide better, faster, and cheaper legal services. You now have that product in your hands or on your screen.

Avoiding Extinction: Reimagining Legal Services for the 21st Century is unique not only because of its narrative form, but also because it is the only book that puts all the pieces together. There are a number of books, articles and blogs written on various aspects of legal innovation. However, to my knowledge, no one has put those theories/innovations all together and reassembled a law firm in its entirety. Alvin Toffler’s 1980 bestseller, The Third Wave, was based in part on the premise that major business breakthroughs come not from single, isolated technologies but from imaginative juxtapositions, developed through large-scale thinking and the application of general theories. In other words, breakthroughs come from those who see the big picture. It is through Avoiding Extinction: Reimagining Legal Services for the 21st Century that I have sought to take a big-picture look at the way legal services can be better provided.

I have been asked by many if an existing law firm can change into a BFC law firm. The answer is: yes. Adopting the efficiencies and other ideas discussed in this book are not impossible. The greater challenge however, will come in doing away with the practice of billing by the hour. Compensation and career advancement in most firms are tied to the number of hours billed by a lawyer. When billable hours are done away with, firms will be forced to restructure how they pay their lawyers and how lawyers will advance within the firm. They will be forced to consider the types of behavior that they want from their lawyers and design compensation and advancement models that drive that kind of behavior. I believe that this type of change will be successful only if a firm adopts a corporate structure. And it will most certainly require strong, focused, and committed leadership—but it is possible.

The discussions in Avoiding Extinction: Reimagining Legal Services for the 21st Century are not limited to a specific legal jurisdiction so that they may better resonate with businesspeople, general counsel, and lawyers throughout the world. Businesspeople and general counsel should read this book with a view to pushing their firms to be more efficient. Lawyers should read it to determine how they can create a better business model.

Are there areas of this book that do not drill down specifically to explain every nuance of the concepts described? Yes, of course there are. Keep in mind that Avoiding Extinction: Reimagining Legal Services for the 21st Century is not meant to be a reference book to be taken down from a library shelf on an as-needed basis. It is designed to be thought-provoking rather than definitive. In those instances, where more information is required it is for the reader to source it out.

Readers of early drafts of this book have had different reactions to its characters. Some lawyers have said that their lives bear no resemblance to that of the characters in the book, while others have said that they thought the book had been written specifically about them. The diversity of experience among lawyers is such that no single character can possibly capture it all, and so the characters in Avoiding Extinction: Reimagining Legal Services for the 21st Century can be nothing more than vehicles through which to illustrate my thoughts about an ideal law firm—and also to add an element of fun.

Finally, as I noted at the beginning of this Preface, the reader should bear in mind that many of the innovations discussed in this book are not science fiction. Although no law firm has yet created a real-life version of BFC, many firms are using one or more of the ideas discussed in this book; and many of these innovations are in use by various other industries. The Legal Services Act in the UK, which came into full force just before the publication of Avoiding Extinction: Reimagining Legal Services for the 21st Century, will deliver some astounding examples of how legal services can be better provided.

The legal profession is now entering the most inventive and disruptive period of change that it has ever experienced.

Keep watching. The fallout will be exciting.

Christmas, 2011

Toronto, Canada

Mitch Kowalski

PART I

CHAPTER 1

Maria’s Dilemma

Maria Fernandez, general counsel for Kowtor Industries, tossed her pen on the desk, sat back in her chair, and sighed. She hated to bring work home and when there was no way around it, she had a standing rule to keep things light. Tonight she had already dealt with a pressing contract matter; now she was settling in to review a large invoice from one of the many outside counsel she used. After that, she wanted to take another look at the RFP response by Bowen, Fong & Chandri, PC.

As Maria swiveled her chair to pull a thick file folder from her briefcase, she heard a loud shout from her kids as they played video games downstairs—another reminder that she was failing as a mother. At least in theory, working in her home office made her closer to her children.

Rising up from her desk, Maria caught her reflection in a plaque hanging from her home-office wall: The Hispanic National Bar Association’s Latina Attorney of the Year, 2011. A pioneer, the president of the HNBA had called her that night. A superb general counsel and a shining example of what a strong and wise Latina woman can do. Tonight, however, she felt neither strong nor wise. And if the reflection was any indication, she looked like hell; every day seemed to add more lines around her eyes, more strands of gray hair. In her reading glasses, she looked older than her mother. Latinas are supposed to keep our youth as we age, she thought, then scowled at the image.

She heaved the folder onto her desk, accidentally hitting the start button on her blood pressure monitor. The arm band began to inflate. She clicked the stop button, pulled the folder in front of her, and started to read, red pen at the ready to strike out duplicate entries, blatant overbilling, and valueless time. However, her mind wandered back to her company’s recent annual meeting.

We anticipate another year in which the global economy will continue to be on life support, Kowtor’s European managing director had put it, and so it is absolutely critical that all business units do their part to reduce costs wherever possible. Harry Kow, Kowtor’s founder, had closed the meeting with a reiteration of those words; it did not go unnoticed that he looked directly at Maria when saying so. It was clear that legal costs would no longer been seen as a necessary evil, shrugged off as the cost of doing business; the legal group would not be exempt from doing its part to improve Kowtor’s bottom line.

Retail sales had not rebounded and that was putting pressure on the manufacturing end. All the while, counterfeiters and trademark rip-offs seemed to be on the rise—as did Kowtor’s seemingly insatiable need for legal services. Maria was doing her best to keep her team of in-house lawyers to no more than six professionals per billion dollars of revenue. But as Kowtor Industries’ annual revenue approached $3 billion, she had an in-house group of twenty lawyers, a group that was threatening to grow larger. The alternative was to send even more work to outside lawyers—but that would play havoc with her budget.

Maria shook her head to clear her mind so she could focus on the statement of account in front of her, for outside legal services related to the acquisition of facilities in Puerto Rico. In short order,