Bar Associations: Protecting Consumers or the Status Quo?

Status Quo

Some Bar Associations are behind the times. And some are challenged by the dual and potentially conflicting roles they play: one, to self-regulate the practice of law in order to protect consumers; and two, to protect the guild of lawyers from competition. A recent Texas State Bar ethics ruling demands a reaction because not only does it fail to protect consumers, it creates additional barriers for advancing the profession.

The ruling states that a Texas law firm may not use "officer" or "principal" in job titles for non-lawyer employees in the firm, as doing so may suggest that these employees exert control or influence over the work of the lawyers, which is a violation of the rules of professional conduct. Additionally, the ruling states that bonus compensation for such non-lawyers can't be formulaically based on the firm's financial performance, as this would constitute unauthorized fee-sharing with non-lawyers. The ruling purports to protect the consumers of legal services, presumably under the premise that non-lawyers are simply not qualified to influence the delivery of legal services and any such interference constitutes a prima facie case of wrongdoing. (See what I did there, pretending to speak like a lawyer?!)

In my role as President of the Legal Marketing Association, and on behalf of our 4,000+ members, I collaborated with the leaders of other legal associations to draft a response urging the Texas Bar to reconsider its stance. These association leaders are well-credentialed professionals who are dedicated to improving the operations of law firms, big and small, and yes, improving the delivery of legal services. And one could argue that by specifically excluding such voices, the legal profession is holding itself back. You should read our letter. It's reasonable and articulate and provides good food for thought.

But speaking individually as a former CEO, I'll be a bit bolder. The Texas ethics commission ruling is ridiculous and unsound. It reflects the worst of the closed-minded lawyer mindset: a belief that lawyers alone can define "quality" in the delivery of legal services. I can assure you, most CEOs spend very little time ruminating about the state of their suppliers' industries or professions, unless some impending disruption in these fields will impair our business performance. And lawyers are doing just that. So, wearing my CEO hat, here's my reaction:

Business clients are unhappy. Lawyers in the mid-size and big firms that serve us often do a terrible job of communicating. They fail to properly manage expectations by limiting the client's surprise. They tend to treat each matter as if it's unique and infinitely variable, yet at the same time expect us to believe their experience in a given field is meaningful. They believe in charging higher fees based on the length of time they've practiced, even when they are unable or unwilling to demonstrate this experience by using matter budgets or project plans. And their fees are typically established irrespective of the value I place on the services rendered, and what alternatives exist for me obtain these same services elsewhere, assuming that the seniority of the lawyer and the time necessary to deliver the work are the primary drivers of value.  They claim that non-lawyers in a law firm, or worse, non-lawyers providing legal services outside the structure of a law firm, e.g., an LPO, must be incapable of providing quality legal services, even when these alternative providers can unassailably demonstrate higher quality at a lower cost.

Does the Texas ruling really protect the consumer? There are different consumers of legal services. As a seasoned corporate executive, mindful of my corporation's risk tolerance and business objectives, and well-trained as a steward of my corporation's hard-earned capital, I don't need as much hand holding. I have long experience managing complex M&A transactions, launching new products requiring IP protection, managing layoffs and plant closures, negotiating labor contracts, and being deposed in contracts disputes. I want the Bar to protect me by ensuring my lawyers are competent in business issues. I can find a thousand lawyers who can conduct legal research, identify precedents, and draft a memo telling why taking some action carries risk. I find far fewer lawyers who think like me and understand the business impact of my legal issues.

And if these so-called protections are not, in fact, in the interests of consumers, might they instead serve to protect the interests of lawyers? It's a curious industry that establishes its own operating rules, self-regulates its members' conduct, decides for itself what competition it will allow, and purposely addresses these issues without the input (or interference?) of anyone outside the profession.  I'm not suggesting that there's a vast conspiracy with nefarious purposes, but I am suggesting that human nature operating within such a closed system is bound to create confusion between "what's right" and "what's right for us." From my perspective, the Texas Bar ruling has a lot to do with protecting lawyers from adopting modern, sound business practices, as if somehow doing so is inconsistent with practicing law.

If a senior business person in a law firm can help the lawyer-leaders understand how to budget, how to profit from efficiency, how to embrace continuous improvement, how to lower fees while improving quality, how to better communicate with unhappy clients, and more, then not only should that businessperson be given a title befitting that knowledge, he or she should be given a compensation package commensurate with that experience, experience that is highly prized in the business arena. And if growing the firm's profits is a consequence of improving client satisfaction, then reward that businessperson in some way commensurate with his or her impact on business performance. If you're unable to distinguish between a non-lawyer who improves firm operations and client-focus, and one who is engaged in the unauthorized practice of law, I question your competence as a lawyer.

If I can't trust you to understand simple business mechanics -- the issues I deal with all day, every day -- and if I can't trust you to recognize your own deficiencies and fill these gaps with competent professionals -- and instead you harangue those who speak truth to power and sit smugly in an alternate reality where partners cannot be wrong -- and if I can't trust your pals in the Bar to protect me from your deficiencies -- and instead they issue rulings designed to forbid competent professionals from meeting my needs -- then I can't possibly trust you to give me sound legal advice. THIS is why law firms are suffering, not because demand for legal services is down, or because bean counters value price over quality.

By the way, let's banish the "non-lawyer" label as unnecessarily non-descriptive and non-productive, prone to nonsense. Defining something by what it's not isn't all that helpful, is it? Or keep it, if it makes lawyers feel better. No one really cares. But understand that corporate executives don't spend much time drawing such distinctions of pedigree and titles within their vendor organizations, so partners should feel free to proudly carry the label of "vendor" or "supplier." We care mostly about rising legal costs and declining value, not labels. The adjacent graphic represents an excerpt from an actual corporate budget representing exactly how even the most prestigious senior partner with sterling credentials is categorized. And yet you rarely hear corporate executives insist on calling partners “non-strategic suppliers.”

If the Bar wants to focus on truth-in-labeling, can we look into :

• Law firm leaders who haven't received a single day of formal management training yet carry the label of practice group leader, or managing partner?

• Non-equity or income “partners” who are merely highly-compensated employees, not equity shareholders in a partnership?

• Can we look into Marketing Partners who have never taken a marketing course, Technology Partners who have no technology training, Finance Partners with no finance or accounting degree?

• Can we look into pitches and proposals that compile disparate experience in creative ways, purporting to reflect deep subject matter experience but instead reflect the common but misguided notion that "We're smart lawyers. If we win the work we can figure out how to do it later?"

• Can we look into lawyers' over-reliance on hourly billing rate cards to purportedly convey the price of legal services, when in fact rates are but one element of the formula for the overall cost and the lack of other data is purposely misleading?

• Can we look into published billing rates that reflect an inflated “sticker” price as compared to actual receivables that perpetually reflect a much lower realized price?

• Can we look at inconsistent discounting and write-down policies in use in firms that bear no relation to "key client" programs?

There's a lot wrong with the modern law firm business. It takes smart people with relevant experience to solve these problems. Forbidding competent professionals to lend their experience isn't productive. Insisting that a law degree is the only distinction necessary to decide what is and what is not "good" for clients is myopic. I call on the Texas Bar to review and revise its ruling to reflect the cold truth that protecting the status quo is not what clients want. Progress waits for no one, and the Bar Associations and incumbent leaders of the profession can wring their hands and lament the intrusion of economic forces, or they can collectively step up to reshape the profession. Relevance is recoverable. Roles as trusted strategic advisors are there for the taking. Your move, lawyers.

View my interview here with Lee Pacchia on the Business of Law webcast at Mimesis Law TV. 

Timothy B. Corcoran is principal of Corcoran Consulting Group, with offices in New York, Charlottesville, and Sydney, and a global client base. He’s a Trustee and Fellow of the College of Law Practice Management, an American Lawyer Research Fellow, a Teaching Fellow at the Australia College of Law, and a past president and a member of the Hall of Fame of the Legal Marketing Association. A former CEO, Tim guides law firm and law department leaders through the profitable disruption of outdated business models. Tim can be reached at Tim@BringInTim.com and +1.609.557.7311.