The Tides of Change

In the information age, law firms need to be partnering with a new breed of specialist
The Tides of Change
Tim Murphy, McMillan LLP
FOR DECADES, it seemed like law firms could command the tides. Competition, outsourcing and client demands all forced changes in many other professional sectors but crashed helplessly against the immovable billable hour. But the lesson of King Canute has finally come to law and the tides cannot be kept back. The supremacy of the billable hour is on its way out and law firms must adapt — and our firm is trying to take the lead.

No one has any real idea of how the law firm of the future will be structured, but some trends are appearing. A number of Canadian firms have decided to keep the existing model by merging with international firms, hoping size and reach will be the answer. Others seem to be using a predatory pricing model to win market share in the short term (although how sustainable that will be over the long term is unknown).

Innovation is the only real solution, if the transformation we’ve seen in other sectors is any indication. And by innovation I do not mean a new firm logo, getting a Twitter presence or improving marketing materials. I mean creating a continuous, firm-wide willingness to welcome — and to seek out — opportunities to create value, improve performance and enhance service.

The information age is decades old, but some firms still work in ways that are virtually Dickensian. They can only guess at what a new file may cost a client. They cannot be sure their resources are allocated efficiently. They continue to charge premium rates for commodity services, and the client is left to judge the value.

Part of the challenge faced by law firms rests in the structure of their partnerships. However, I believe the modern law firm needs to be more than just a collection of independent entrepreneurs. Law firms need to find a way to use innovative, modern tools to improve management and overall value brought to each client relationship, without undermining the benefits that lawyers as owners brings to quality legal services.

Leading innovation starts with understanding the business of law, but law firms have historically relied on the anecdotal experiences of their lawyers in shaping that understanding. Those times are coming to an end. The good news is that law firms are sitting on massive amounts of information about their businesses. The challenge has been in accessing it and turning that data into knowledge and action.

At our firm, we decided that the only solution was to bring true innovation to law. We did that by becoming one of the first law firms in Canada to hire a data scientist, and we paired up with IBM to help us with cutting-edge technology. IBM’s collaboration with McMillan on Big Data in the legal world will apply those lessons. Using IBM Cloud and its predictive analytics system, SPSS, we can understand the work that goes into an assignment, what staffing is most effective, how time is spent and how it could be better spent.

For clients, it will mean heightened transparency. We can, for example, show clients what transactions have cost in the past and why, and be predictive as to the cost in the future. Clients will be able to make fixed-fee judgments with detailed information as to why that pricing makes sense. Our ambition extends further, as we hope to make this platform directly available to clients so they can see and compare what they have been paying — and getting — in all the legal aspects of their business.

Are data analytics the secret to the future of the profession? Probably not on their own, but doing the same old thing just a little better is not good enough. Real change is coming to law firms, and a systematic, transparent and evidence-based management model is only the start. It’s a step toward becoming the innovative law firm that doesn’t fight the tide, but rides it into a successful future.

Tim Murphy is an executive partner at McMillan LLP. His practice focuses on transactions with a public component, with an emphasis on project finance, infrastructure, energy and public-private partnerships. He was formerly a Chief of Staff to the Prime Minister of Canada.