the new normal - oregon state bar...biglaw criminal defense / public defenders regional law firms...
TRANSCRIPT
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The New Normal: What’s Already Different and What’s Ahead
William HendersonProfessor, Indiana University Maurer School of LawChief Strategy Officer, Lawyer Metrics
July 20, 2016Oregon State Bar Center
Tigard, OR
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1997 Dodge Caravan
2003 VW Passat
2014 Honda Accord
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Agenda
I. Profession or a guild?
II. Change we haven’t noticed
III. Change we don’t control
IV. Change by type of client
V. How innovation diffuses
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I. Profession or guild?
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The Enterprise (circa 1814) The New Orleans (circa 1812)
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Life on the MississippiTimeline of River Pilot Profession
T1: US Inspector issued license
T2: Too many pilots → Low wages
T3: Collective action, BPA, still too many pilots
T4: Demand outstrips supply, BPA uses market
power
T5: BPA Cairo box system, makes
travel safer
T6: Insurers demand BPA
Pilots
T7: Rent-seeking with owners,
captains
T8: Railroads, civil war, BPA
corruption, collapse
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II. Change we haven’t noticed
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Source: Marc Galanter, Planet of the APs, 53 Buff. L. Rev. (2006)
Expenditures on Legal Services as Percent of Gross Domestic Product, 1978 to 2003
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Source: NALP, charts generated by William Henderson
0%
10%
20%
30%
40%
50%
60%
70%
Percentage of Entry Level Jobs in Private Practice
% of Entry Level Jobs in Private Practice 2-Year Moving Average
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Bar Passage Required Jobs
77%
57%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2000 2013
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% Partners and Associates in the NLJ 250, 1977-2012
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36%26%
19%13%
52%64%
70%74%
12% 10% 11% 13%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1980 1991 2000 2005
Less than 35. 35 to 64 65 or older
Demographics of Licensed Bar
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III. Change we don’t control
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HEINZ-LAUMANN “TWO-HEMISPHERE” THEORY
People Organizations
1975
1995
People Organizations
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Bespoke Standardized Systematized Packaged Commoditized
Needed human capital:• Information technology• Systems engineering• Finance• Marketing• Project Management• Law
SUSSKIND’S FIVE STAGES OF EVOLUTION
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Bespoke Standardized Systematized Productized Commoditized
Susskind ‘s Market Evolution
“Tw
o-H
emis
pher
es”
X
YIn
divi
dual
sSm
all
Busi
ness
esR
egio
nal
Busi
ness
esN
atio
nal
Busi
ness
esG
loba
l Bu
sine
sses
Artisan Guild
BigLaw
Criminal Defense /
Public Defenders
Regional Law Firms
Solo & Small Firms
EMERGING LEGAL ECOSYSTEM
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Bespoke Standardized Systematized Productized Commoditized
Susskind ‘s Market Evolution
“Tw
o-H
emis
pher
es”
X
YIn
divi
dual
sSm
all
Busi
ness
esR
egio
nal
Busi
ness
esN
atio
nal
Busi
ness
esG
loba
l Bu
sine
sses
Artisan Guild
BigLaw
Criminal Defense /
Public Defenders
Regional Law Firms
Solo & Small Firms
Multidisciplinary Teams
Green Zone – growing
LeanLawe.g.,
Seyfarth
NewLaw – e.g. Axiom, Counsel on Call, United
Lex
e-Discovery Vendors
Legal Publishers e.g., LegalZoom, Rocket Lawyer
PeopleLaw – e.g., Modria, Avvo, Legal
Force
In-House Vertical Integration
TechLawKM &
Analytics Vendors
E.g., kCura,Recommind,
PLC
Low Cost Provider
EMERGING LEGAL ECOSYSTEM
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Individuals
N = 323 million
Individuals
N = 323 million
Organizations
N= 6.5 million
Small Businesses (<$50M)
N = 6 million
Large Private Businesses (>$50M)
N =33,000
Publicly Held not Fortune 500
N = 6,500
Fortune 500
N = 500
$0 $50 $100 $150 $200 $250$289 Billion US Legal Market
$11,000 $2M $7M $60M
Average client legal spend
$250
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Individuals
N = 323 million
Individuals
N = 323 million
Organizations
N= 6.5 million
Small Businesses (<$50M)
N = 6 million
Large Private Businesses (>$50M)
N =33,000
Publicly Held not Fortune 500
N = 6,500
Fortune 500
N = 500
$0 $50 $100 $150 $200 $250$289 Billion US Legal Market
$13,300 $2M $7M $60M
Average client legal spend
$214
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IV. Change by Type of Client
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2007 2012
% of Law Office Revenue by Type of Client
Source: US Census Bureau Economic Survey (2007, 2012)
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Hyatt Legal Services and the Storefront Revolution
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Legal Complexity
1986 2016 2046
Experience and Perception
Economic Growth
Growth Complexity Tradeoff
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1986 2016 2046
Reality
Experience and Perception
Economic Growth
Search for substitutes to deal with cost and quality
Reality
Rise of the Large Firms
Higher profits
Growth Complexity Tradeoff
Legal Complexity
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Data, process, technology
Division of labor, specialization
Legal Complexity
Reality
1986 2016 2046
Experience and Perception
Economic Growth
Reality
Growth Complexity Tradeoff
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Sources of Corporate Legal Work
In-House• Counsel to C-suite• Counsel to bus. units• Project leadership• Core legal work• Risk management
Law Firms• Strategy / Direction• High-level counsel• Specific expertise• Litigation and trials• Large transactions
Managed Services
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In-House• Counsel to C-suite• Counsel to bus. units• Project leadership• Core legal work• Risk management
Law Firms• Strategy / Direction• High-level counsel• Specific expertise• Litigation and trials• Large transactions
Managed Services• Process centered• High volume• Project managed• Team-based• Metrics• Cont. improvement
Sources of Corporate Legal Work
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Key Ethics Rules that affect non-legal professions in the legal industry
• Rule 5.4. Professional Independence of a Lawyer
• Rule 5.5. Unauthorized Practice of Law; Multijurisdictional Practice of Law
• Rule 5.6. Restrictions on Rights to Practice
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Legal Middle Market
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V. How innovation diffuses
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First Edition (1962) Fifth Edition (2003)Everett Rogers
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Rogers Diffusion Curve
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% of Farmers Hearing about Hybrid Seed Cornvs. Percentage Accepting, By Year
Source: Ryan, B., & Gross, N. C. (1943). The diffusion of hybrid seed corn in two Iowa communities. Rural Sociology 8:15-24.
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Manufacturing Finance Medicine Consulting
Law
Percentage of Total Acreage Planted with Hybrid Seed
Source: “Hybrid Corn: An Explanation in the Economics of Technological Change” in Technology, Education, and Productivity (1988).
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100%
50%
S-shapedadoption curve
(% of market adoption)
Legal Industry in
2016
Rogers Diffusion Curve
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Variables Determining Rate of Adoption
Dependent Variable to Be Explained
Perceived Attributes of Innovation1. Relative Advantage2. Compatibility 3. Complexity 4. Trialability5. Observability
Type of Innovation-Decision1. Optional 2. Collective 3. Authority
Communication ChannelsIncreased by more and better mediums
Efforts of Change Agents Educational and promotional efforts
Nature of Social SystemE.g, traditional versus modern, isolated or interconnected to other systems
Rate of Adoption of Innovation
Adapted from Everett Rogers, Diffusion of Innovation Fig 6.1 (2003)
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Variables Determining Rate of Adoption
Dependent Variable to Be Explained
Perceived Attributes of Innovation1. Relative Advantage2. Compatibility 3. Complexity 4. Trialability5. Observability
Type of Innovation-Decision1. Optional 2. Collective 3. Authority
Communication ChannelsIncreased by more and better mediums
Efforts of Change Agents Educational and promotional efforts
Nature of Social SystemE.g, traditional versus modern, isolated or interconnected to other systems
Rate of Adoption of Innovation
Adapted from Everett Rogers, Diffusion of Innovation Fig 6.1 (2003)
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“One of the easiest things in the world is to say ‘no’ to change; one of the hardest, to provide for its reasoned and orderly occurrence.”
-- Herman B WellsPresident of Indiana University
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Bar LeadershipArea of focus Example
1. Promoting our core mission to serve the public interest
Emphasizing ingenuity and collective action as the road to prosperity (i.e., we need another Cairo Box system). Think capital campaign.
2. Gathering useful facts
Standardized surveys across US legal profession to so identify both regional and national issues and trends to create a single lexicon on profession; share results freely.
3. Sharing innovationLocal and state innovation awards that feed into a national competition (everyone needs to see the better corn).
4. Quality control Standardized training program for using technology in the modern practice of law; taught in every law school for credit.
5. Your ideas
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Discussion and Q&A