This post discusses a key point in Altman Weil's 2014 annual survey of law firms in transition, which was released last week, and its implications for law firms. An addendum to the post also summarizes other highlights of the survey.

The survey underscores the importance of efficiency improvements

The survey notes that

• Improving efficiency is paramount. 94% of law firm leaders believe a focus on improved practice efficiency will remain a permanent feature of the legal market, as will increased price competition.
• Partners still not ready for change. Law firm leaders believe their partners have only a moderate (6 on a 10 scale) awareness of the challenges of the new legal market and only a moderate level of adaptability to change.
• Firms aren't changing. Despite nearly unanimous belief that a focus on practice efficiency is a permanent trend, 61% of firms have not significantly changed their strategic approach in this area.
• KM and LPM are the preferred routes for change. In firms of over 250 lawyers, knowledge management is the most-cited way firms are seeking to increase efficiency of legal service delivery (78%), followed next by legal project management (73%).

What this means for law firms

The Altman Weil survey suggests that law firm leaders know what to do, but have been unable to get their partners to buy in to needed changes.

Perhaps this reflects some basic misunderstandings – both about what knowledge management is and about how to get lawyers to change.

What is knowledge management?

Many law firm leaders mistakenly believe knowledge management has something to do with technology. That shouldn't be the focus at all. Knowledge management is about how lawyers share what they know about client work and about their firms as businesses. Some elements involve traditional law firm activities, such as lawyer training programs and effective practice group meetings. Other elements involve newer practices, such as checklists and after-action meetings.

The main point is that it's about improving how lawyers collaborate, in terms of both efficiency and quality - doing more and better with less.

How to get lawyers to buy in to change

Law firm leaders know it's one thing to envision what needs to be done, and quite another to convince their partners to do it. Behavioral techniques are just as important to gaining lawyer buy-in for knowledge management changes as they are for other important firm initiatives. A successful approach involves the following elements:

• Start with a single practice group. A single practice group has more commonality of interest and is more manageable. Also, word-of-mouth success stories from one practice group will make the other groups want the same thing. Select a group whose leader is already interested in a change initiative.

• Show that senior management cares. There is no better way for the firm to demonstrate the importance of the initiative than for the firm's chairman to attend the brainstorming meeting described below. There are, of course, other ways, such as remarks by the chairman at a practice group meeting. Even an e‑mail to the group would be valuable.
• Ask the lawyers. To create a sense of ownership, hold a meeting with a cross-section of the practice group (10-20 lawyers), attended by the group's leader. Lawyers who have worked at other firms can be especially helpful contributors. The meeting's stated purpose is to come up with ideas for improving the way the group collaborates. An unstated purpose is to create a sense of ownership for the ideas and to pursue change.
• Use an outsider. The meeting should be run by an outside consultant with seasoned lawyer credentials to whom the group can relate. The consultant can inject suggestions based on experience of what has worked elsewhere. By discussing these suggestions, the lawyers will accept them as their own. The presence of the consultant also emphasizes to the practice group the special importance senior management places on the initiative. The consultant can turn general ideas into specific action plans, making it easier for the lawyers to envision what needs to be done. The consultant can also run the follow-up meetings noted below and keep the pressure on the working teams.
• Keep the firm's strategic goals in mind. If the firm is pursuing significant hiring of lateral lawyers, a goal of the initiative should be to assimilate their learning across the rest of the practice group. If the firm is emphasizing certain practice areas, one of those should be the pilot practice group. If the firm has recently completed a merger, melding the practices of the legacy lawyers should be an objective.
• Prioritize based on value and difficulty. Start with the ideas that the group believes are high value and that are easiest to accomplish, such as checklists. Defer until after some successes the ideas that are high value but more difficult, such as collecting data about each matter to enable finding similar matters for fee benchmarking, finding precedents, locating experts, staffing and assembling pitch materials. Do not pursue the ideas that are low value and difficult, which will include many of the technology suggestions, such as automating standard forms of complex agreements.
• Give billable hours credit. Align actions with words by giving billable hours credit for work on the efficiency initiative, at least for the associates.
• Make lawyers publicly accountable. Assign the various ideas to partner-associate teams. Hold periodic status meetings of the entire group, so that they will have to report in front of their colleagues. Publicize successes. Assign an administrator to speak to the teams and circulate to the entire group a weekly status grid. Have the practice group leader speak to slow-moving teams. Reassign the projects that do not progress.

The above elements address various ways to get lawyers to be responsive to internal firm initiatives, such as leadership, commitments to colleagues and envisioning steps.

Conclusion

The law firms that are successful in improving efficiency will have the advantage. The hard part isn't deciding what to do; it's getting it done. Start with a pilot group and keep up the pressure. This is a long-term investment that will take time and effort at the outset but can bring great benefits over time.

Addendum – Other survey findings regarding changes for law firms

Other findings of the Altman Weil survey include:

• Many permanent changes. More than two-thirds of the respondents believe the following will also remain permanent features of the legal market:
  • More commoditized legal work
  • Fewer support staff
  • Technology replacing human resources
  • Competition from non-traditional service providers
  • More non-hourly billing
  • Increased lateral movement
  • More part-time lawyers
  • Fewer equity partners
  • More contract lawyers
  • Smaller annual billing rate increases
• Law firms not serious about change. Law firms and clients agree that clients are only moderately pressuring law firms to change their legal service delivery model to provide greater value to clients. Still, clients do not think law firms are serious about changing their service delivery model.
• Change driven by outside forces. Few law firm leaders think market change will be driven from within their organization.
• Most firms behind on pricing changes. Virtually all firms are experiencing increased price competition, but only 29.5% are changing their strategic approach to pricing.
• Most firms collecting pricing data. In firms of over 250 lawyers, 87% are supporting their pricing strategies by collecting data on cost of services sold.
• Heel-dragging on AFAs. While over 80% of firm leaders believe more non-hourly billing will be a permanent trend going forward, only 10% of firms' 2013 revenue was derived from non-hourly arrangements and only half the firms increased the percentage of revenues derived from AFAs in 2013. The number of firms that are proactive in their use of AFAs has declined by almost one third since 2010.
• Too many non-equity partners. More than half the firms with more than 250 lawyers believe they have too many non-equity partners. Yet only 2.2% of surveyed firms have an up-or-out policy for this partner category.
• Little long-range planning. Only 5.3% of firms are routinely looking farther than five years out in their planning.

About the survey

The survey, conducted in March and April 2014, polled managing partners and chairs at 803 US law firms with 50 or more lawyers. Completed surveys were received from 38%, including 42% of the 350 largest US law firms.

The full survey is available here.

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