In the spring of 2015, I was in the UK meeting with a wide range of lawyers and legal professionals. One of the most interesting people I met was Cathy Mattis, who at the time served as Head of Process Improvement for Berwin Leighton Paisner (BLP), one of the Silver Circle law firms. Mattis began her career as a solicitor in the corporate finance area but subsequently joined BLP Knowledge Management unit as a practice support attorney. Her initial was to organize “precedent” transactional documents so that BLP lawyers could do their jobs better and faster. Mattis eventually became a Project Manager and later Head of Process Improvement. At the time I met her, she was pursuing in MBA in process and operations management while also serving in both a managerial and client-facing role for BLP.
Suffice it to say, Cathy was the most impressive legal professionals I had ever met because she and her colleagues were framing out a completely new way of provisioning legal services, one that required teams, process maps, technology, and feedback loops designed to drive continuous improvement. Quality was going up, costs were going down, and team members in the Managed Services facilities she designed and managed were enjoying better work-life balance. Moreover, Mattis, was becoming quite popular with clients because she could speak credibly on how project management and process management could be harness to create win-win relationship for the clients and the firm. In fact, she’d show them how to do it through her popular training classes.
Earlier this fall, it was big news in the U.K. when Mattis and three members of her project and process management team left BLP to joins Freehills Herbert Smith, a larger Silver Circle competitor. Freehills issued a press release, and the story was covered by Legal Business, Legal IT Insider, BigLaw, Legal Week, and The Lawyer. This is fanfare usually reserved for an M&A or Private Equity partner with a large and prestigious client following. Yet Mattis and her colleagues were not partners at BLP. They were professional staff.
The UK’s Head Start
Note that on the application of people, process, and technology to the practice of law, UK is significantly ahead of its US counterparts. This is attributable to two factors that interact with one another. First, UK firms have remained much closer to their lockstep roots, which tends to incentivize greater collaboration and longer time horizons among partner-owners. Second, the UK outgrew its home market about fifteen years before U.S. firm, which caused UK lawyers to become pioneers in client-friendly alternatives to the billable hour. Stated another way, necessity, the mother of invention, visited the UK first.
It is possible to make this evolution seem very planned and linear, but that is far from true. Mattis career is a wonderful case in point. She became a practice support lawyer (PSF) primarily to create flexibility for her family life. (For a background on the PSF role, see Ian Nelson, The Emerging Role of the PSL in the US, 3 Geeks and Law Blog, Feb 15, 2015. Yet, knowledge management as a field within the legal industry was still in its infancy. Mattis was part of the first generation of project managers in law firms. From that perch, she saw the enormous potential for applying process principles to obtain gains in quality, efficiency, and cycle times. So she educated herself on the topic, both through formal education and practical implementation. As such, her team’s initiatives have been regularly in play for the Financial Times’ Law Firm Innovation Awards.
What makes Mattis so valuable on the lateral market is that built and managed a best-in-class process and managed services team at BLP. Therefore, it is not unreasonable to think that she could, if properly resourced, do it again. Although I don’t want diminish the importance of BLP’s senior leadership, it was clear to me back in 2014 that Mattis was extremely knowledgeable about the change management process–picking low resistance starting points, getting early wins, avoiding jargon, embracing simplicity, and making the change process fun and non-threatening.
It is virtually certain that Cathy Mattis departed for Freehills for a compensation package that was much closer to an equity partner than a non-partner professional. But I doubt that even 5% of partners in the UK or US appreciate the sea change that is beginning to take shape. As for legal academics, the percentage is much lower.
The Re-Emergence of Firm Specific Capital
The emergence of world-class process specialists means that large corporate law firms are, for the first time in several decades, creating “firm-specific capital.” This is a academic term used by great law firm scholars like Ron Gilson, Marc Galanter, and the late-Larry Ribstein, but the underlying concept is not hard to grasp. A firm creates a resource that will produce its highest economic value within the firm. If a lawyer leaves, the underlying resource remains because client loyalties flow primarily to the law firm rather than the lawyer. When it’s working well, lawyers are spending their days augmenting the firm’s firm-specific capital. Why? Because if offers the highest expected return and lowest risk-reward ratio over the short, medium, and long-term.
The Cravath system was a classic example of creating firm-specific capital. The deal was simple. We will pay you, the lawyer, this top-of-the-market salary to focus on these sets of clients using this detailed work system. The client will pay us a premium price for work he cannot buy elsewhere. A subset of you will become partners and share in the profits of the enterprise, but all of you will receive training that has substantial resale value to our clients and other law firms. Indeed, you can count on us with help on any transition. So if you cast your lot with us, you will fare very well over the long run.
What’s the result? Highly talented people join the firm and work tirelessly for the enterprise. This grows the firm-specific capital and weds the client more tightly to the firm. It is worth noting that McKinsey is based entirely on this same model, explicitly borrowed from Jones Day circa 1928. See Marvin Bower, Perspective on McKinsey (1974).
In the 1980s and 90s, large U.S. law firms were two or three generations removed from their founder partners. They were also making a lot of money, a fact that became widely known through the advent of the legal press. Meanwhile, within large corporate clients, general counsel were taking over the trusted advisor relationships. They were also put in charge of hiring and managing outside counsel and developed the mantra “we hire the lawyer, not the firm.” So what happened? Individual lawyers with a client following lateraled, or threatened to lateral, to another firm in order to capture the full value of their marginal contribution to the firm. This in the dynamic that caused Larry Ribstein to write The Death of BigLaw, 2010 Wisc L Rev 749.