Dr. George Beaton has decades of experience advising law firms with all aspects of running the firm and providing services to clients. He is Executive Chairman of beaton, a management consulting firm. Dr. Beaton also operates the highly regarded The Dialogue on Remaking Law Firms blog and is co-author of the book Remaking Law Firms: Why and How. I asked him for his thoughts on a variety of topics including the ongoing evolution of law firms, his blog, and what law firms can learn from in-house legal teams.
What was your motivation behind wanting to explore the evolution of law firms?
I have been advising law firms for about 30 years with experience first in South Africa and since the mid-1980s in Australia, South East Asia, London, the US, and Canada. My work has covered a wide range of situations and firm types: running partner retreats usually to formulate strategy and profit improvement, and keynote addresses, partner performance management and pie-splitting, marketing and business development, growth by merger, gathering and interpreting client feedback.
In 1994, Dr. Margaret Beaton – my wife, business partner, and an organizational psychologist – completed a Ph.D. in the University of Melbourne Business School on how clients of corporate and commercial law firms perceive the value they derive from outside counsel. In the early 2000s, we decided to commercialize Margaret’s thesis. This led us deep into the role of clients shaping what law firms do and the changes in the industry that were just becoming apparent (including referring to the private practice branch of the profession as an industry).
These changes included growing signs of increased buyer power and price-down pressure, the steady growth of law departments and more deliberate make vs buy client decisions about procuring legal services, and the emergence of hyper-competition amongst law firms.
It became clear to me as someone who is not a lawyer (I studied medicine and practiced in an academic environment for a few years), a business school teacher of strategy and marketing, and student of organizational structure, that the business model of law firms was beginning to fail them. By business model I refer to the partnership structure, lack of a meaningful balance sheet, making fabulous profits by the leverage of employed lawyers and time-based charging (where risk is transferred to the client).
Like all industry cycles and business models, the party eventually ends. To me the questions were:
What future model/s would best serve clients and the owners of firms, and
How firms could make this transition?
The first upshot was writing an e-book, NewLaw New Rules in 2013. This e-book was based on a blog post of mine that went viral and was stopped at 80,000 words. In turn, NewLaw New Rules went viral putting me near the centre of the global wave of innovation and transformation of legal services. Then in 2016 through the ABA, as a rejoinder I published Remaking Law Firms: Why and How with Dr. Imme Kaschner.
In the course of these years, the language of NewLaw and BigLaw (neologisms) entered the lexicon as mnemonics to describe the business models of the newcomers like Axiom Law (and many other forms) and the traditional firms, respectively.
What do you think can law firms learn from in-house legal teams?
Increasingly, today’s in-house lawyers are learning faster than law firms. This is because, in a corporate environment, there are uniformly-focused incentives and more powerful externalities to change than there are in traditional law firms. While still not the norm, law departments are able to draw on the top-notch functional specialists in the corporation, e.g. procurement, IT, human resource management, and process improvement to help them innovate.
And of course, the influence of CLOC (the Corporate Legal Operations Consortium), the Association of Corporate Counsel (including the value challenge which I think is a great idea) and the Buying Legal Council are providing large and creative quantities of shared ideas, assistance and encouragement to innovate.
Our recently-published survey of the attitudes and opinions of in-house lawyers regarding innovation shows just over half regard their law department as very or extremely innovative, and three-quarters encourage their outside providers to innovate. Yet, they are disappointed with the initiative of law firms, for example, one-in-four cannot name a single firm they regard as innovative!
What do you see a law firm looking like in another five to ten years?
In Chapter 5 of Remaking Law Firms: Why and How I use the metaphor of a kaleidoscope in 2025 to answer this question. In other words, the current homogeneity of law industry structure with all firms in any particular strategic group being by and large the same will be well on the way to being fragmented and heterogeneous.
There will be many more smaller, narrowly focused firms serving corporate clients with specialized value propositions, a much bigger market share for NewLaw firms like Elevate Services, Lawyers-on-Demand, and Axiom Law. More co- and out-sourcing to provider consortia whose members both compete and collaborate with each other (so-called co-opetition) and a great deal more use of technology to both augment and substitute for lawyers’ services. The highly fragmented lawtech start-ups will be well-advanced in consolidating (as is now occurring with e-discovery). And, finally based on the #dolesslaw movement evoked by Ron Friedmann, there will be many advisory and consulting parts of law firms (i.e. diversified) assisting clients prevent legal problems at source. This is akin to Richard Susskind’s metaphor of a fence at the top the cliff, rather than an ambulance at the bottom.
In your view, how does legal process design fit in the delivery of law practice?
Practice has evolved in an inefficient way for two reasons as I see it. Traditional and hard-to-change time-based billing provides no incentive to be efficient, in fact, it’s opposite. And by and large, each lawyer evolves her/his way of practising which is perpetuated by the master-apprentice model and drive for autonomy of partners as business owners and practitioners.
Enter legal process design or re-engineering. This is not a new field, it’s an application of well-proven business process re-engineering. Client pressure for (much) greater efficiency and firms’ need to maintain profitability demand use of tools like process re-engineering. This poses major cultural challenges in teaching old dogs new tricks. But learn, they must or slowly perish.
To lawyers re-thinking their delivery of legal services, what would be your first piece of advice?
Simple – and perhaps hard at the same time – ask your clients what you can do to deliver better value to them? Some will say, reduce your fees, but our experience and research show there’s vast opportunity in the things clients want more and less of to receive better and faster service.
Of course, no two clients are identical in their needs and expectations of how outside counsel can better serve them. But there are common themes, so go out and find these. And act.
What motivated you to start your blog?
I started The Dialogue on Remaking Law Firms blog when I realized that between NewLaw New Rules and Remaking Law Firms I had over 100 friends in five continents who had helped me research and write my two books. In effect, I had crowd-sourced the ideas in addition to using conventional research methods. When I asked the first few if I could add their posts and articles to my blog, without exception the answer was an enthusiastic ‘Yes’.
The result is a vibrant and growing community invested in remaking law firms and contributing to improvements in the legal services supply chain. I am immensely grateful to them all.