Why Can’t Lawyers Innovate?

Next month in San Francisco, the College of Law Practice Management will meet to consider some interesting empirical studies on why law firms – especially in North America – seem so slow to innovate.

The working paper published this month seeks comments.

I’ve been spending part of my summer on a research project looking at innovation in US law firms, or the lack thereof. According to the interviews I’ve been conducting with lawyers, consultants, and law practice administrators, law firms may be some of the least innovative organizations in the US economy.

This is partially due to the nature of law as a profession. Laws don’t change very often. As one of my interviewees noted:

Lawyers practice a profession that is rooted firmly in the power of precedent. They don’t want to change and are very suspicious of change efforts.Retired Chief Administrative Officer of several law firms, July 06.

It’s also due to the ways in which law firms structure themselves. It’s hard to be innovative when you’re billing by the hour and you’re measured by the number of hours that you bill.

Innovation is not a dominant strategy; profitability is. Law firms will do anything to preserve profitability and not take risksConsultant to Law Firms, July 06..

Considering that there are over 50,000 law firms in the United States, you’d think that a few might be bucking conventional legal wisdom and would be working on innovative products or practices. And there are a number of firms that are innovating within the legal profession.

But what the legal profession finds innovative is often quite unremarkable for other industries. For example, Orrick Herrington, a large global firm based in San Francisco, in 2002 combined the back office operations of all its different offices at the Orrick Global Operations Center, in Wheeling, W. Virginia.

In most industries, this kind of move (which happens frequently) might not fit into the “innovation” bucket. According to the editors at California Lawyer, however:

Orrick’s move has revolutionized conceptions about normal law-firm structures …”California Lawyer, 2003.

These kinds of successes are rare enough that they are often republished as case studies.
Too often, innovative initiatives flounder and fail. “[Most law firms] won’t think about innovation in a larger sense. They’ll try little things that are new, and they usually don’t succeed because they don’t have the infrastructure or support.”Consultant to law firms, 2006.

Why should lawyers want more innovation? Even with its absence, US lawyers are prospering. As of May 2005, according to the Bureau of Labor Statistics, there were almost a million people working in legal services industries. More than half of these were lawyers, and their average compensation was about $110,000 a year. There are a few other occupational categories, like surgeons and CEOs, that get paid more. But there’s no other category with the combination of so many people being paid such high wages.

The entire post / billet is worth reading.

It closes with a wonderful provocation from David Maister:

Perhaps the greatest advantage lawyers have is that they compete only with other lawyers. If everyone else does things equally poorly, … even the most egregious behavior will not lead to a competitive disadvantage.”David Maister in The American Lawyer, April, 06.

Comments

  1. Our society (and this study) is geared towards seeing innovation as good, and lack of innovation as bad; however, both are neutral. Do we really need law firms to be innovative? They are not creating products where something new can be invented. They are, rather, providing services which are reactive to client and client industry needs. There may be new industries to which they can market themselves, and new ways to package law firm services, but the underlying services largely remain the same. One wants a law firm to be steadfast and around for the long term, not innovative and ==poof!== gone in a flash if those latest innovations don’t work.

    I think most innovation is seen in the way firms market themselves, the support/vendor services sold to firms, and (sometimes as a result of these two aspects factors) the way firms administrate themselves. From what I can tell, this study talks mostly about lack of innovation in the way firms operate administratively. The times when we see most innovation in this regard are when firms merge. Then they are forced to somehow combine two administrative cultures.

  2. Surely one wants innovation in the way in which they meet the legal needs of the public and serve their clients. The point is that David Maister, Richard Susskind and Richard Granat (in their different ways) have each sketched out ways in which we could improve the way we do things, yet the take-up has been spotty (at least on this side of the Atlantic).

    In a piece that I’ve been trying to reformat to post here, I argue that one reason for this is that compensation systems operate differently on either side of the Atlantic, and that English firms (and Australian too, BTW) seem much more willing to make longer term capital investments in process improvement and support. North American firms seem much more focussed on short-term results to the bottom line.

  3. How are firms outside North America accomplishing this–are they structured differently? It seems to me that, in addition to hourly billing, the organization being a partnership is definitely a hindrance as well. In a small firm where one personality may guide the ship innovation may be possible, but in a larger firm where 25, 50 or 300 partners have to agree on a direction, I just don’t see how any rapid change can be possible. Unless you get a charasmatic visionary partner in a leadership role whom everyone wants to follow. But I don’t see too many of those around.

    For firms I think a short period of innovation–finding new ways of doing things–would be okay, but one would not want a law firm with a permanent culture of innovation.

    You’ll be glad to know I’m almost finished reading my McLuhan for Managers book and will be moving on to other theory soon….

  4. Lock-step compensation schemes are a large part of the answer.

    Eat-what-you-kill schemes focus on personal profit maximization and short-termism

  5. There’s also a middle ground for mixed compensation schemes. Pure lock-step, IMO, doesn’t always encourage entrepreneurial behaviour, which can be a big part of encouraging innovation.