Legal Markets

Disruptive Innovation and Quality Metrics

CLP is actively engaged in determining how changes in regulatory structures, technology, and market forces are disrupting the traditional model of the delivery of professional services. The core of this evolving research flows from CLP’s March 2014 conference on Disruptive Innovation in the Market for Legal Services. The conference featured plenary addresses from Clayton Christensen (Professor, HBS), Mike Rhodin (Senior Vice President, IBM Watson), Christopher Kenny (Chief Executive, UK Legal Services Board) and William Hubbard (President of the American Bar Association). Underpinning the event were four Working Groups, in which more than 15 legal start-ups offered demonstrations of their legal technologies.

Since the event, CLP has been actively recruiting a team of researchers to understand and study disruptive forces within the legal profession from a variety of angles, including: the role of technology, innovations in human capital management, changing business models, the use of big data and other forms of market analytics, the application of design thinking, and other forms of innovative thinking.

Chief Innovation Officers brainstorm on a Microsoft Hub during the Center’s 2016 Innovation Leadership Colloquium

“Chief Innovation Officers” Survey

CLP is currently conducting a survey of law firm and in-house “chief innovation officers”—individuals charged by their organizations with leading efforts to innovative existing structures and ways of doing business. The survey seeks to understand who these people are (e.g. are they lawyers or non-lawyers?), what they are exactly charged with (e.g. are they tasked with simply with technological innovation or do they have a broader mandate?), whether they have resources (e.g. budgets and/or people?), and other associated questions. The survey is in the field and continues to garner support and responses.

As the project has developed, CLP faculty have increased its reach by convening industry leaders to share expertise and insights. To that end, in Fall 2016, CLP hosted the Innovation Leadership Colloquium, held at HLS (and hosted in collaboration with HLS Executive Education), which brought together 25 “chief innovation officers” of law firms and 25 legal operations leaders of companies to discuss what innovation means to clients and providers and to begin a dialogue on how the two might work together. The Colloquium included presentations by the head of legal operations at Google and the General Counsel and legal design lead of IDEO; it also included breakout groups utilizing the Center’s Microsoft technology. The featured keynote was from Dan Nova, partner of Highland Capital, on the “Future of Work.”

Quality Metrics

The Center is also interested in understanding how to define “quality metrics in law.” Law has traditionally operated in a world in which “inputs” formed the basis of analysis. For instance, the billable hour—how much time a lawyer puts into a particular matter—has traditionally been the standard metric for measuring the overall worth, and even the quality, of legal work. That is changing. Pushed by increasingly sophisticated general counsels who have long stressed the need for “data analytics,” in-house legal departments are increasingly developing “output” based criteria for measuring the cost and quality of legal services. The Project’s aim is to better understand how to measure “quality” in legal services, and to offer a set of recommendations as to the development of quality metrics in law. Initial findings were published in a 2016 issue of Legal Business World as well as on Dolin’s blog.

To learn more about this project or to get involved, email Bryon Fong.

Corporate Purchasing Project

How are relationships between clients and service providers in the corporate legal market evolving, and why? Answering this critically important question requires both the availability of unbiased quantitative information about how large corporations make law firm hiring and assessment decisions and a robust qualitative and theoretical framework to evaluate broader variations and trends. Yet purchasing decisions by sophisticated in-house counsel are vastly understudied aspects of legal practice and hardly any scholarly attention has been directed to assessing the ways in which corporate clients are responding to the numerous changes in law firms and the legal profession itself.

In a word map of interviews with CLOs, the word “relationship” was used far more frequently than “smart” or even “expertise.”

Prior research that focuses specifically on how large companies purchase services from law firms is scant and limited. Trade publications and general interest periodicals provide business insights and news, but rely on anecdote and often emphasize novelty for its own sake. Surveys of high-ranking in-house counsel by trade groups or consulting firms also provide useful information, but report low response rates or do not report response rates, do not compare respondents and non-respondents, and, most importantly, primarily study small or mid-sized privately held companies that together represent a relatively modest segment of the overall market for high-quality, strategic corporate legal services. Much of the available research on in-house counsel also focuses more on how general counsels attempt to contain costs, rather than how companies evaluate or manage the quality of elite legal services.

Purchase our White Paper, entitled Corporate Purchasing Project: How S&P 500 Companies Evaluate Outside Counsel.

To learn more about this project, email Bryon Fong.

RESEARCH AGENDA

We conceived of the Corporate Purchasing Project as a way to establish and study a body of novel empirical data drawn from surveys and interviews of 166 chief legal officers (“CLOs”) of S&P 500 companies—one-third of all such large publicly traded companies. As detailed in the Methods section of this report, our data set comprised both written survey data from 139 companies and in-depth interview responses from 43 companies spread across a diverse range of manufacturing and service sectors.

Specifically, we sought to explore four topics of substantial importance about which there is little systematic information:

  • How do these companies evaluate the quality of legal service providers when making hiring and legal management decisions?
  • Under what circumstances do these companies discipline or terminate their relationship with their law firms?
  • How do these companies evaluate whether to follow “star” lawyers when they change law firms?
  • In what ways do these companies manage the intersection between law and public relations?

The resulting dataset is groundbreaking for its depth and breadth and provides a fascinating empirical look into the decision-making of CLOs as they seek to balance imperatives like cost control and legal matter outcomes with the value of long-term law firm relationships, such as relationship-specific capital, quality assurance and a soft guarantee of legal capacity when the need arises. Theoretical research published before our study suggests that the preeminence of individual lawyers and specialized teams within law firms (rather than firms themselves) combined with the growing sophistication of CLOs and other in-house counsel should decrease the value of long-term relationships. But our findings challenge this notion and suggest an enduring value to long-term corporation-firm relationships that should prove foundational to the ongoing evolution of the legal services sector.

CLP is in the process of planning an update to the Corporate Purchasing Project to capture a post-recession environment.

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SHARING OUR WORK

Corporate Purchasing Project: How S&P 500 Companies Evaluate Outside Counsel, a White Paper (2011), order the report here.

Michele DeStefano Beardslee, John C. Coates IV, Ashish Nanda & David B. Wilkins, Hiring Teams, Firms and Lawyers: Evidence of the Evolving Relationships in the Corporate Legal Market, Law and & Social Inquiry. 36, 4 (2011), available here.

David B. Wilkins, Team of Rivals? Toward a New Model of the Corporate Attorney-Client Relationship, 78 Fordham L. Rev. 2067 (2010), available here.

Michele DeStefano Beardslee, Advocacy in the Court of Public Opinion, Installment One: Broadening the Role of Corporate Attorneys, 22 Geo. J. Legal Ethics 1259 (2009), available here.

Michele DeStefano Beardslee, Advocacy in the Court of Public Opinion, Installment Two: How Far Should Corporate Lawyers Go? 23 Geo. J. Legal Ethics 1119 (2010), available here.

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The Reemergence of the Big Four in Law

The Reemergence of the Big Four in Law is a continuing research initiative led by David. B Wilkins and Maria Jose Esteban, a researcher from Spain, which examines the reemergence of the Big Four’s legal offerings in Europe, the emerging economies, and elsewhere. Over the last decade the Big Four accounting firms have quietly rebuilt their legal networks, integrating these services into a new model of “globally integrated business solutions” and aggressively promoting this model in emerging economies in the Asia-Pacific, Latin America, Africa, and Middle East regions.  Recent trends toward relaxing restrictions against “alternative business structures” and “multidisciplinary practice” are likely to accelerate the growth of the Big Four’s legal networks.

Research on this topic found a wider audience through additional popular and academic publications, including a piece in Bloomberg Law (March 2017) and an article to be published in the Journal of the American Bar Association.

The research was recently published in Law and Social Inquiry.

The Integration of Law into Global Business Solutions: The Rise, Transformation, and Potential Future of the Big Four Accountancy Networks in the Global Legal Services Market
Law and Social Inquiry, 2017
HLS Center on the Legal Profession Research Paper No. 2017-2

David B. Wilkins Harvard University – Center on the Legal Profession
Maria J. Esteban, ESADE

Abstract:

Using a unique data set comprised of original research of both the corporate Web sites of the Big Four—PwC, Deloitte, KPMG, and EY—and their affiliated law firms, as well as archival material from the legal and accountancy press, this article documents the rise and transformation of the Big Four legal service lines since the enactment of the Sarbanes Oxley Act of 2002. Moreover, it demonstrates that there are good reasons to believe that these sophisticated players will be even more successful in penetrating the corporate legal services market in the decades to come, as that market increasingly matures in a direction that favors the integration of law into a wider category of business solutions that these globally integrated multidisciplinary practices now champion. We conclude with some preliminary observations about the implications of the reemergence of the Big Four legal networks for the legal profession.

Non-Lawyer Ownership

CLP is actively engaged in thinking about how regulatory changes that allow for non-lawyer ownership of legal services and other similar regulatory changes might impact the legal profession. Countries like Australia and England and Wales now allow for non-lawyer ownership of legal services, and other jurisdictions are considering a similar shift. Proponents of non-lawyer ownership claim it increases competition, drives down prices, and provides consumers with more choices. At the same time, opponents fear that the outside influence it brings will undercut the distinct values of the profession and create new conflicts of interest. This project explores the different forms non-lawyer ownership has taken so far and its impact in jurisdictions that have adopted it. Reforms like non-lawyer ownership are an important part of how regulators are transforming legal markets around the world.

CLP Affiliate Fellow Nick Robinson is actively engaged in this topic area and has written extensively on the professional ramifications of non-lawyer ownership. You can read his paper on the topic here.

CLP also hosted Chris Kenny, the head of the UK body in charge of regulating so-called Alternative Business Structures (ABS) as well as William Hubbard, the ABA President, at its March 2014 Disruptive Innovation conference. Both debated the merits of non-lawyer ownership. You can watch their remarks here.

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