By Kate Reder Sheikh and Julian Sarafian for The American Lawyer
When asked about innovation and the startup culture at Amazon, Jeff Bezos remarked that moving on to Day 2—Day 1 being the period of innovative spirit that launches a company and Day 2 being what comes next—goes something like this: “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”
Bezos would be disappointed to see that the status quo in much of Big Law is Day 2.
Lawyers do not have the greatest reputation for being innovative. Between long waits to see a judge, hard paper requirements in our legal system and the occasional technological gaffe involving an attorney posing as a Zoom cat, our profession is certainly not the beacon of creativity or change. In Big Law, this may be by design.
Big Law firms continue to rake in profits year after year and steadily grow. This is the case in spite of the booming legal tech industry that has already siphoned off billions in would-have-been revenue, the growth of in-house legal teams and small firm growth. In an industry that is essentially immune from free market principles due to the gatekeeping of the bar exam and lawyer-guild lies a structure that is not taking innovation seriously despite the very tangible benefits such practices create.
The firms that have boomed in the last 50 years have not done so on the back of tradition. They have done so primarily by riding the wave of technology clients and pivoting their practices to that clientele (i.e., building out their technology transactions practices, creating interdisciplinary privacy law teams, etc.). Today the firms that are growing are the firms that are innovating. This includes a prominent Silicon Valley-based firm that has innovated culturally (allowing associates to bill time spent at Black Lives Matter protests), professionally (more transparency with leadership and associate ranks) and mechanically (creating a software platform that startups can use directly without consulting with an attorney). This firm has seen steady growth (higher than its peers), prosperity and clout in no small part because of the reputation it has built within and outside of the legal industry as an innovative law firm.
Modern associates go (and stay) where they feel they will be cared for, heard and understood. They go to firms that feel innovative and reflect their values. A former corporate associate from a major Silicon Valley firm lamented that with innovation at their firm there was “a lot of lip service, where we are doing this to say we are innovating, when in reality some of the things being done were really shallow.” The mindset that many law firms are driven by—“if it ain’t broke, don’t fix it”—ultimately stifles and deprioritizes innovation to the detriment of the organization as a whole. It also fails to address a basic premise that every employee implicitly wants answered when they go to work: “Why do I do what I do?” When the answer is a flat “because we did it this way last year and last year was profitable” rather than “let’s improve this, let’s change that, let’s build this,” employee morale suffers. When morale suffers, attrition results. Attrition impacts the bottom line.
What are some signs that your firm is not innovating? An associate referred to her firm as “stodgy” in that “all of the clients are owned by two older partners who never let anyone else speak to them. That’s the locus of power. We’re still expected to be in at all hours (despite COVID).” She described announcing that her husband was going to take paternity leave and how that was met with snickers from the managing partner in her office. Doors in the office are always closed, and partners “treat [her] like the help.” Millennials aren’t interested in firms where all of the power is held by partners who are 30 years older than their associate base, and where the client list is filled with companies that are gigantic and inscrutable.
No firm is immune from the test of time. Certain firms today that are falling backwards in the ranks of the Am Law 100 were top white-shoe firms for most of their history until they ignored the boom of technology and found their status diminished. With multibillion-dollar valuations popping up left and right in legal tech and in-house positions becoming increasingly popular and available at the junior-level, the clock is ticking on all law firms to adapt. The top firms of today may not be the top firms of tomorrow.
Clients will soon be demanding the same. When asked about the importance of innovation practiced by their law firm, a lead counsel at a Series D-backed company told us that “firms are really going to be able to differentiate by how much they are innovating. … That will change which firms companies start with and spend the rest of their corporate existences with.”
The growth of project management tools like Asana, AirTable and Slack means that clients will soon be shopping their projects to law firms that can seamlessly integrate their work processes with those of their clients. Email may be the standard in Big Law, but it ends at the office doorstep. This can even expand to law firms’ physical spaces—the more they feel like your grandparents’ stuffy, hierarchical law office, the less they will appeal to today’s clients, many of whom are fresh out of college. One firm in the Bay Area has a totally open office plan, where associates and partners sit together on the floor (some on yoga balls!) and the corner offices are used as video game rooms. The whole office feels like a space for ideas, not for closed doors. Clients respond, and the firm represents some of the most compelling tech unicorns—and has since they were in a garage with a big idea of their own. The firm, and its profits, are booming.
We don’t know innovation until we see it. It may look like doing away with the traditional partnership structure, borderless practices with cross-staffing between countries, going without an office or dramatically changing the role that associates play. Will the firms of the future reflect their emerging tech client base? Hard to imagine, but not impossible. What we do know is that only a select few hyper-traditional firms will be able to maintain their stature in an industry that must examine itself for areas of improvement. It is in the best interests of partners, associates, staff and the legal industry for Big Law to innovate. It’s time to go back to Day 1.
Kate Reder Sheikh is a managing director in Major, Lindsey & Africa’s associate practice group. Julian Sarafian is a Harvard Law School graduate and former corporate attorney.