What if the associates ran the asylum?

Editor's note:  This Shark believes even the "older crooks" in the Probate Court of Cook County should start to worry.  Lucius Verenus, Schoolmaster, ProbateSharks.com

 

What if the associates ran the asylum?

Max Karacz (left), of Hamburg, Germany, and Faisal Delawalla, a Chicago associate, talk during Bryan Cave’s two-day Business Academy for young associates. E-mail invitations sent to the associates read in part, “Are our clients trying to automate us out of existence? How do we lead the law firm of your future in an age of innovation and automation?” —Photo by Karen Elshout

July 1, 2015

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By Roy Strom

Seated in a tight circle, six Bryan Cave associates exchanged answers to a hypothetical question.
Imagine that, years from now, our firm is the most innovative law firm around. What were the biggest challenges we overcame to get there?
The first answer came almost immediately.
Getting old partners to relinquish power.
Sixty-year-old lawyers are out of touch with technology and today’s legal market, another associate offered.
This was no coup perpetrated by disillusioned fourth-years.
The associates attended the Bryan Cave Business Academy, a two-day seminar in downtown St. Louis at a 160,000-square-foot shared office space called T-REX. One associate joked that the venue was appropriate: Our profession is a dinosaur, he said, and it is run by dinosaurs.
The firm flew in 100 associates from offices as far as London, Hamburg and Shanghai. In a rare behind-the-scenes look at a law firm’s internal communication, Chicago Lawyer was allowed to attend.
In a shared tech space not much different than Chicago’s 1871, the young lawyers were encouraged to take control of the firm’s future. The way to do that, they were told, was to find ways to use technology to cannibalize their partners’ business.
The firm’s chair, Therese Pritchard, kicked things off by telling associates to “push back” when partners stifle new ideas. Associates were given an in-depth look at where and how the firm’s $635 million in revenue came from last year. And they were told how, like at virtually every Am Law 100 firm, partners take home the year-end profit. (Prompting one nervous associate to ask if they had saved any money for a rainy day.)
The firm’s message was clear: These young associates are entering a business on the brink of profound change brought on by technology and shifting economics.

A consulting firm was hired to draw illustrations that captured key moments during the two-day meeting.

Photo by Karen Elshout.

The future depends on their ability to adapt. And partners need to learn to listen and empower them.
Toward that end, the firm held a “hack-a-thon” in which associate groups presented ideas for technologies that would aid their practice. The firm promised to spend $10,000 developing the winning idea.
Bruce MacEwen, a New York-based law firm consultant who writes the blog Adam Smith, Esq., was on hand to give a presentation titled “The Rise of the Machine.”
“I have never seen a firm do anything like this,” he said. “What I have never seen is an internally driven, ongoing training program that really invites associates to take the reins. This is Bryan Cave doing a little R&D in their future. It’s an experiment.”

Generation gap

Generational transition has vexed lawyers ever since they entered into partnerships. But the current and pending transference of power will present new challenges, all highlighted during the Bryan Cave associate seminar.
Firms are no longer competing with only one another. They are competing with the advent of technology that will eat portions of firm revenue — much as e-discovery has already freed associates from spending years in document caves.

John Alber and five other Bryan Cave leaders convene to pick a hack-a-thon winner. They selected an idea to use “smart tags” in bankruptcy litigation to automate updates for clients and to synthesize filings.

Photo by Karen Elshout.

Business may not be severely affected by the time today’s rainmakers retire. But the same likely can’t be said for midlevel associates or even new partners. And that creates a management problem.
Law firm consulting group Altman Weil highlighted the problem in a survey in which it asked managing partners: How would you rate your partners’ awareness of the challenges of the new legal market? More than 42 percent of responses said “low” with only 6 percent responding “high.”
When asked to rate partners’ adaptability to change, a mere 1 percent came back as “high” with more than half recorded as “low.” Meanwhile, managing partner confidence is plunging.
This year, 9 percent of respondents said they had a high level of confidence in their firm’s ability to adapt. The figure was nearly three times higher four years ago.
“Helping partners understand why change is needed and overcoming their natural resistance to change are two critical leadership imperatives,” the Altman Weil survey says.
This was not lost on the associates in St. Louis.

The thinking-man’s computer presents a problem

The two-day seminar that began on the Thursday before Memorial Day was a follow-up to the first business academy held 18 months ago. Another will be scheduled, and the firm believes it will take five years to educate and empower associates to operate in the new business environment.

John Alber records a hack-a-thon presentation. Alber, who retired at the end of June, created teams of employees at the firm who help partners and associates use technology and a better understanding of law firm economics to improve their margins. He believes that law firms must embrace technology – and the efficiency it brings – to stay in business.

Photo by Karen Elshout.

The business academy at Bryan Cave — which has 60 lawyers in Chicago — is largely the brainchild of John Alber, who today is wearing a gray sport coat, white shirt, black jeans and sandals. Alber will retire at the end of June with plans to live with his wife on a houseboat. If he qualifies today as a “dinosaur,” he has never acted like one.
He began practicing at Bryan Cave as an associate in 1981 before leaving to build up and sell a technology-based transportation logistics business. Since returning to the firm in 1999 as a member of the firm’s management committee, he has helped develop an internal infrastructure to implement new technologies. His work has helped the firm win an award as the most innovative law firm of the year multiple times by the International Legal Technology Association.
He said the business academy is about “cultivating owners of the firm.”
“The business that you’re in needs to be treated very much like a start up because of the things we’re going to be talking about today,” he told the crowd. “What we’re talking about is inevitability.”
The threat to the associates in this room, he said, can be traced almost to a single metric: The number of calculations computers can perform for $1,000.
That number has been rising exponentially for years. Alber told the associates that, within their careers, a computer will have the processing power of the entire human race. The result (at the very least) is new abilities for computers.
IBM’s Watson, for instance, can beat the world’s best Jeopardy! contestants. That sort of “thinking” is what lawyers have always thought nobody else could do — just as pilots once thought a computer could never land a plane.
More and more revenue streams will be automated, he told associates. First, it was document discovery. Then legal research. Now, document automation — computerized legal writing — is making advances. Soon, computers will be able to write better documents, Alber said, by studying databases such as the Security and Exchange Commission’s EDGAR. He said the firm is investing in document automation, which is already “transforming certain practices.”
In an interview, he said: “If we focus on clinging to these revenue streams because we historically have done these things and failed to recognize what we fundamentally do at heart, I don’t think the future bodes well for law firms like that.”

From here to there

Using real-life business examples, Alber told the associates about a mindset that he believes can be the difference between success and failure when an industry faces upheaval.
The first attribute of “adaptive companies,” he said, is an ability to anticipate change. Then, they conclude that they won’t survive unless they disrupt their own business. They don’t watch their contemporary competition for cues. Change will come from outside businesses, he said. Think of what Apple did to music.
By way of example, he pointed to the diverging paths of Kodak and Fujifilm, two camera and filmmakers, in the wake of the digital revolution.

Against a backdrop of illustrations from the two-day conference, associates applaud a group’s hack-a-thon pitch. One illustration reads: “Rise of the MACHINE. ” Nearby, an associate daydreams at his desk: “What business are we actually in?”

Photo by Karen Elshout.

Kodak shrunk and eventually went bankrupt as sales of film and cameras dwindled. It has no long-term employees today. Fujifilm, meanwhile, thrived by diversifying. It applied its chemical knowledge to make products in pharmaceuticals and cosmetics. Today, its 31,000 employees even make ultrasound machines.
“Kodak thought they were in the paper and chemicals business,” Alber said.
“If we think we’re in the business of drafting documents and doing document discovery, we’re Kodak. We’re Kodak. So you have to ask the question: What business are you really in? What do you really do?”
Alber believes law firms are in the business of helping clients manage risk. But he readily admits managing risk is not a service that the firm (or others) charges clients for, tracks or measures to compensate its employees. Firms have been in the business of selling billable hours.
To operate like Fujifilm, he said the firm should consider purchasing complementary businesses, prioritizing practice areas where it already succeeds, teaching associates to use new technologies and investing in research and development the same way its clients do.
He ended his presentation with a slide that read “Get √.”
The associates — most of whom likely did not excel at math — were lost on the meaning: Get radical.
“It’s an introvert’s joke,” he said.
“But the point is, innovation is not just a buzzword for us. We won’t survive unless we get radically innovative.”

Pricing changes

Alber’s presentation made it quite clear the firm has at least one trait of an adaptive company — it is anticipating change.
But will the associates be able to apply what they’ve learned?

Josh James, a Washington, D.C., associate, delivers a pitch during the hack-a-thon.

Photo by Karen Elshout.

Pritchard, the firm chair, acknowledged that upsetting the law firm hierarchy can be scary for an associate. But she told them to try anyway.
“Despite our best efforts, many of us are burdened by the way we have always done things in the past,” Pritchard said.
“I bet you have heard from partners in this firm: ‘That’s not the way we do it. This is the way we do it.’ You need to push back. You’re the ones who are not burdened by the way we have done things in the past. And you’re the ones we hope are going to come up with the innovative ideas that change the practice of law for us.”
One way associates practiced this new way of thinking was by experimenting with new pricing models.
Christian Zust, director of client technology, presented associates with four scenarios faced by real clients of the firm. The associates were asked to propose alternative pricing schemes.
In one scenario, a new CEO of a national restaurant chain reached out to a partner after realizing the company’s legal situation was “a nightmare.”
They had no guidelines for individual restaurants to follow when executing or renewing contracts, which led ones they wanted to keep to expire and others they wanted to expire to be automatically renewed.
As the associates brainstormed, Alber turned to Zust: “They are working better than I see a lot of partners working,” he said. “I’ve got goose bumps.”
Then the associates presented their ideas. They would handle the contracts on a flat fee. They would create protocols and guidelines for the company. And they would develop a tech solution to manage the contracts and alert the legal team to expiration dates.

The winning hack-a-thon team included Ali Ragsdale, (third from left). “The goal of this technology would be to save the client money and to provide an accessible format for the client to get automatic updates and automatic summaries of federal court filings,” she said, describing the winning idea.

Photo by Karen Elshout.

In real life, it turns out, that’s exactly what Zust and his team did.
The associates came up with close to the exact real-life solutions in each of the other three examples.
Zust said the four examples he showed associates all came from work he had done in the past seven days.
He said that more often than not, associates — not partners — come up with ideas to use technology to solve a problem in their practice.
The release this year of the firm’s “strategic plan,” which includes innovation as a core pillar, has encouraged associates to call his team more often, Zust said.
“It maybe didn’t invigorate the associate base, but it gave them a reason to go out and call us with their ideas,” he said. “I think they always had them, but they maybe weren’t always as vocal as they have been in the past few months.”

Now you try

Associates had mixed feelings coming out of the seminar.
“It’s refreshing that they care enough to tell us about this,” one Denver associate said. “But it’s also intimidating.”
The firm is asking associates to solve these problems, he added, but they had better be prepared to give them the power to implement those changes.
Tim Zhender, a Chicago associate, was in the seven-person group that won the “hack-a-thon” with an idea that would use “smart tags” on federal bankruptcy filings to update clients automatically on their case and provide brief summaries of each document.
He described the blunt presentation on the threats his profession is facing as “somewhat unsettling.”
“But it’s reassuring, one, to know that the firm is aware of this. And, two, that they are willing to communicate it,” he said. “Better that than to be blindsided.”
Ali Ragsdale, a St. Louis associate who was also in the winning hack-a-thon group, echoed Zhender’s comments. She was asked if she felt she could apply those ideas.
“Is it feasible? Yes. In small steps, absolutely,” she said. “And if we don’t do it, who’s going to?”

Associates were given two minutes to make pitches during the hack-a-thon. The teams were formed the day before, but it wasn’t all work and no play. More than 40 associates went to dinner at Rosalita’s Cantina in downtown St. Louis.

Photo by Karen Elshout.

One associate in whom Alber saw a bit of himself was Josh James, out of the Washington, D.C., office. The two discussed creating a free subscription service for legal advice delivered like the book-reading app Audible. Not an easy solution, they quickly determined.
Pressing on to another problem, James told Alber he had discussed with a partner whether the firm should purchase a consulting company to handle “bounty programs” for tech companies. Under the idea, companies pay hackers money to spot and fix holes in their software. A law firm could add some value in that area, James said, but there were already too many competitors.
When asked, James said that, yes, he had previously considered a lot of the things he heard in St. Louis.
“Once a computer can read, understand and do some rudimentary logic, I’d hope that a lot of the areas of law will open up to automation pretty easily,” he said.
“I don’t think the law should be something mystic and mythical that people can’t actually do.”
This reporter mentioned that the “mystic” nature of the law is the precise reason he is able to make money doing it.
“But if I could figure out a way to help everyone else do it, I’d probably make a whole lot more money than I can right now,” he said. “And if I can be the first one to do that, then I don’t have to worry about the law firm model anymore.”