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ANALYSIS: Law Firms Poised to Steal the Operations Spotlight

Nov. 4, 2019, 11:15 AM

The use of legal operations methodology in corporate legal departments has become widely accepted. The 2019 Bloomberg Law Legal Operations & Technology Survey found that 95% of corporate respondents have a legal operations function. However, law firms are stealing the spotlight. The same survey found that 87% of law firm respondents have a legal operations function. Surprised? You shouldn’t be. Increased attention from industry groups, shifting law firm messaging around innovation, and demands from clients all suggest that law firm legal operations adoption will continue to increase throughout 2020.

Industry Attention

The Corporate Legal Operations Consortium (CLOC) announced at its annual meeting in May 2019 that it was opening its doors to law firms. A July 2019 press release cited the demand for law firms to show their corporate clients efficient delivery methods and the increased investment by firms in legal operations staff and technology as reasons for the change.

It will be interesting to see if the corporate community embraces collaboration with their law firm counterparts in the way that CLOC hopes they will. While the need for partnership is clear, one of the commonly voiced values of the CLOC annual meeting was the freedom it affords corporate legal operations professionals to share ideas and strategies openly, away from the watchful eye of their outside counsel. Balancing collaboration and innovation with the desire for privacy among in-house counsel will likely be a driving factor in the success of this partnership.

Innovation Messaging

Certain law firms have been leading the charge when it comes to embracing innovation. In a recent Bloomberg Law X.0 podcast episode, Daryl Shetterly, Director of Orrick Analytics, shared that his firm, Orrick, Herrington & Sutcliffe, gave an award last year to the attorney who cost the firm the most money by coming up with a solution that substantially reduced the number of hours on a project. Shetterly said that’s one way to “trumpet to the entire department that we value efficiency. It’s not just something we talk about.”

Earlier this year, Baker McKenzie promoted David Cambria to chief services officer. Cambria joined Baker McKenzie in 2018 as the firm’s first global director of legal operations. According to Bloomberg Law Big Law Business, the “promotion is a signal he has had at least some success in his task of integrating Baker McKenzie’s pricing strategy, legal project management and other alternative legal services offerings into the firm’s main, lawyer-led business.” It also sends a clear message to the firm and to the firm’s clients: the legal operations discipline is important, as is finding innovative ways to integrate it into the business.

Rapid changes in talent, technology, and processes mean that sophisticated law firm clients are asking questions of and expecting answers from their outside counsel. This dynamic is, in part, driving innovation and raising acceptance of the legal operations function in law firms.

Billing

Attention from corporate clients is driving change in law firm billing models. Pressure to move from hourly billing to alternative fee arrangements (AFAs) is constant. However, according to Bloomberg Law legal analyst Meg McEvoy, actual adoption of AFAs for technology-related reasons is relatively low. In the first article of her two-part analysis, McEvoy found a correlation between law firm revenue and adoption of AFAs. She noted that Bloomberg Law’s survey data showed “[h]alf of respondents at $1 billion-plus revenue firms with knowledge of billing approaches saying their firms had adopted alternative billing models.” Fixed-fee arrangements, portfolio work, and volume discounts were all mentioned as more-utilized AFAs, McEvoy noted.

Despite the growing focus on AFAs, the hourly billing model is still used most of the time. However, with the use of data, new technology tools, and an ever-present spotlight from corporate clients, McEvoy declares that AFAs are “here to stay.”

Growing Pains

The growth of legal operations, innovation, and technology teams within law firms will likely continue in 2020. However, growth can be an indication of growing pains to come. Law firms will have challenges to overcome as the legal ops industry continues to move forward at a rapid pace, and it will be interesting to see how successful firms rise to meet them.

Read about other trends our analysts are following as part of our Bloomberg Law 2020 series.