Future law: more changes coming to the legal profession with faster adoption rates
CEO of LexFusion, Joe Borstein, and Stephen Poor, Chair Emeritus at Seyfarth Shaw, discuss how the business and practice of law have evolved since 2001 in terms of technology adoption, globalization, regulation, and outside investment in the legal profession. Both conclude that the pace of change will accelerate because of the pandemic as people realize technology can enhance the delivery of legal services. Read transcript
MEET OUR GUEST
Mr. Poor started his career with Seyfarth as an employment lawyer with focus on trial work and ERISA litigation. In his current role of Chair Emeritus, he helps lead SeyfarthLabs, an industry-leading technology research and development group.
CEO of LexFusion
Joe Borstein is the CEO of LexFusion. Also, columnist for Above the Law and Advisory Board Member for Penn Law’s Future of the Legal Profession initiative.
Chair Emeritus at Seyfarth Shaw
Stephen has led the team at Seyfarth to deliver value to clients using SeyfarthLean – a disciplined way of thinking about the delivery of high-quality legal services.
- Ep. 004 - Transcript - Future law: more changes coming to the legal profession with faster adoption rates
Hi everybody and welcome to Future Law. I’m your host, Joe Borstein, CEO of LexFusion and certified total freak about the world of legal innovation. Together on Future Law, we discuss the tectonic forces bubbling under the surface of the $800 billion legal industry. First, we’ve globalization, allowing lawyers and allied professionals across the globe to collaborate seamlessly on legal work anywhere on the globe. Technology is automating routine legal processes today and relentlessly crawling up the value chain. Legal regulation is being questioned and changed allowing professionals outside of the bar to work right alongside lawyers solve legal problems at scale, and also enjoy some of the quite juicy profits of traditional legal work. And finally, outside investors are pouring in from Silicon Valley VCs to New York private equity funds to recently even public stock offerings. These investors see an opportunity to make a broken legal system dramatically better.
Futurist Peter Diamandis likes to say, “You want to make a billion dollars? Figure out how to help a billion people.” Well, law affects every single solitary person on this planet. There’s a lot of people to help and there’s a lot of money to make in the process. So whatever drives you, idealism, greed, or even just excitement, I beg all lawyers and allied professionals to pay a little attention to this legal innovation space. You just might find your purpose here. Well, today I’m very happy to be with Steven Poor. Steven Poor has a 40 year history with one of the world’s great law firms, Seyfarth. He has risen up through the ranks over his 40 years from labor lawyer to employment litigator, to running the hiring committee to the executive committee, to the chair and managing partner in 2016, where he was involved with lodging SeyfarthLean to currently the chair emeritus and leader, and the executive sponsor of SeyfarthLabs. Thanks so much for joining me, Steven.
Thanks, Joe. Looking forward to it. It’s always great to chat with you.
Absolutely. So first I want to hit the basics like that was quite a mouthful to give the audience your journey. Tell us a little bit about what led you to a place where you are the executive sponsor for SeyfarthLabs and you’re pushing forward the world of legal innovation.
Yes, so my individual story is sort of consistent with the story of the firm because we are aligned. I took over as chair of the firm in September of ’01 and my prior experience had been working, from an administrative standpoint, I had worked on technology. I’d supervise marketing. I had worked with a number of our offices when I became chair and managing partner. And we began to chart emerge out of the post 9/11 recession. and if you recall, we entered into some really good years for law firms. Many years of good years for law firms, but they certainly were a good years. But the levers that was being pulled at the time was rate.
The industry wasn’t really doing things any better or more efficiently. They were just charging more and getting it. And it struck me that there had to be a better way of thinking about the business. So we started a journey in ’05 using Lean Six Sigma Principles to try to think through the process behind the delivery of legal services. Within a few years, we began to bring tech into it as a tool to enable us to achieve some of those results. And again, to build out a tech R&D function within the law firm. And so I’d always been interested in the capabilities, technology, particularly legal tech brought to whether it’s automating workflows or collaborating with clients or sharing documents, whatever it might be.
So when I stepped out of the role as firm’s chairman managing partner, we had SeyfarthLabs team setting there. And so after discussion with the firm, it was agreed I would take on some responsibility for working with that team and building out the capabilities. And we’re now about 15 people, developers, legal solution architects, all sorts of people that work on applying technology as part of a process oriented solution set for our clients. It’s been a fabulous opportunity to work with some really great folks that are really very well-versed in the impact of technology and the practice.
That’s fantastic. I want to zoom in on one thing you said. The first thing in the world of what I’m going to broadly call legal innovation that seems to have caught your eye is the ability of process improvement to get legal work done more efficiently. That was also my first experience. My first move out of big law was to Pangea3 where the core focus at the time was process. How do we manage large teams so each person is marching in step. What do you think the catalyst was around the early two thousands that that made companies like Pangea3 firms like yours, other managing partners like Ralph Baxter start to take a heat and pay attention to the ability of process to really make law firms better.
I think it arose out of the summer things that I described for me, I don’t know about your experience, but for a lot of us and Ralph is certainly one of those guys, we had a belief that there had to be a better way to do things. And as we began to look at the practice and you began to think about it, most of my career, I was a litigator and I had a certain way that I did things, the way I organized steps, the way I approach cases. It wasn’t in violet. Sometimes you do it a little bit differently, but I found a way that worked for me. And I realized that was a process that I was putting in place. And it drove efficiency and drove effectiveness. And I suspect you found the same thing that as you drill into it, there’s this belief that the delivery of legal services is this artisan craft.
And make no bones about it. There are moments of inspiration. There are moments of wisdom that need to be brought to bear and advice and the human characteristics, but there’s an awful lot of the practice that can be thought of as a process has to be done right. It has to be done well, it has to be done to client satisfaction, but there’s a lot of inefficiency in that delivery of legal services that you can iron out and make your client much happier and much, much more willing to hire you again. And I think as we got into the remnants of the tech boom after a one in 2000, a lot of that thinking, which is technology has a lot of process thinking embedded in it, I think carried over into the legal space. Certainly my perception has carried over to Pangea3 and your competitors at the time.
Absolutely. And it was probably 15 years later that I read a book called the E-Myth Revisited, which if the audience has not read, I highly recommend. Stephen you mentioned how, of course there are moments of brilliance and creativity in the practice of law, probably more than in most other industries. But I think even those moments are more frequent and more exciting when you can put the rest on cruise control, right?
Yeah. I think that’s right. I mean, you want people to operate at the top of their license, right?
And so you begin to think about it as if technology can do something, let technology do it because that frees you up to do the things that you need human characteristics to do, empathy, inspiration, wisdom, and that should be exciting to people as opposed to sitting there reviewing documents for hours on end, putting aside the financial issues associated with it. I’ve done that. I did that when I was an associate.
I have too.
It’s not interesting.
It’s very, very painful. I still get [crosstalk 00:09:02].
It’s very, very painful. I mean, there’s learning that comes out of it, right? But you can learn in a different way. And the more you can free people up to bring those dynamics that go with the nature of being a human to the practice, I think the more job satisfaction they’re going to have, and the happier they’re going to be.
I agree and let’s go back to the financials, which you just put a pin in. I think 10 years ago, when I started writing for Above the Law, one of my most fervent beliefs was that with the expansion of legal technology process and globalization, you would also see an increase in profits for law firms. I think the last year has been a really interesting year playing out that theory. I don’t think I got it perfectly, but I think a lot of it was pretty accurate. You’ve had an absolute explosion in the amount of financing going to legal tech. You had a huge explosion in the type of talent they were getting, the market capitalization of the companies in legal tech industry, but simultaneously big law had a great year, fantastic year, right?
So this idea that technology and globalization and process is taking from a static pie. I believe that that theory is breaking down a bit. And what we’re seeing is more and more work comes out of the woodwork when we figure out reasonable ways to tackle these large scale problems. Well, what have you seen from inside of firm?
No, I think that’s exactly right that it’s not unlike the development of the ATMs. In the banking industry everybody believed that tellers were going to go away and in fact, the teller staffing has increased because they’re doing different and more interesting tasks. And I think it’s the same thing here, Joe, the demands of clients operating and you hit on it in a global environment, the risk profiles, the legal problems have exploded. And so the demand for high quality lawyers who are able to bring the sophistication that they need to solve the problems has increased exponentially. And so you were absolutely right in your prediction. And the pandemic has been an example of that. I mean, people are dealing with all sorts of novel issues now, when do we bring people back from work? How do we do vaccine mandates? What is safe to open? How do we comply with the various regulations going on around the world, let alone around the country? You need lawyers for this and it’s increased the demand.
Yap, and we’re seeing play out also, of course, in the hiring market. Hiring market for lawyers, especially in AMLAW firms, unbelievably tight right now. I’m hearing about signing bonuses just to go a few blocks away from one AMLAW firm to another, of over a hundred thousand dollars for associates that are already getting paid fantastic amounts of money. I think that’s great. There’s nothing wrong with that when people are bringing a lot of value. One of the things we talk about to our law firm clients, and I’m curious your view on this is get out of the mindset of the only way to get more work done is to bring on more people. It is a great way to get more work done. It’s always going to be a huge part of it, but it’s not the only way.
At a certain point legal technology should be looked at as part of the, what’s the word I’m looking for? The leverage stack, right? Like we think of leverage in law as how many associates to a partner, but leverage can also be how many clients’ work can one partner control and manage and do excellently? And certainly the number of associates is relevant to that. But if you have technologies that make your team of 10, 10% more efficient, in theory, that’s just as good as bringing on a new associate. So the costs have to be looked at across what it costs to bring on a new person and what it costs to bring on new technology and processes. I’m wondering if in this extremely tight market, those ideas are starting to blur a little bit, whether to bring on tech or people.
I think they are. And I think you’re seeing the demand. I suspect you see it from LexFusion and the demand from your law firm clients to understand the tech and tech capabilities. We’re certainly seeing a growth in demand at SeyfarthLabs for our services, which are not dissimilar. But I think more and more firms are looking at technology as part of their increasingly sophisticated solution set to growing revenue, to growing business and growing efficiency. So I agree a hundred percent.
That’s really interesting to hear from your perch. So let, let’s move on a little bit. I talked about the four factors of my introduction, globalization, investment regulation and technology. I think we’ve talked a bit about technology, a bit about globalization. How does this new wave of investment in publicly traded companies, what do you think that that means for the world of lawyers?
I find it exciting. I find it reaffirming to the path that certainly Seyfarth has been down for a number of years and paths like pioneers like you have been down and in front. I think it’s going to increase the sophistication of the technology solutions that are out there. I think it shows the market power of technology. And I think it’s going to create more innovation within the space. As money follows innovation, innovation in turn follows money.
And I think it’s going to produce more and more sophisticated programs are going to help lawyers service our clients, get more work done and be more efficient.
Yeah. Just from the LexFusion point of view, we brought on our first company without a lawyer and the founding team building legal tech. Why? Because they see opportunity there. They see the ability to come in and bring extremely sophisticated technological chops into a growing market where again, we’ve had at least three companies go public and we’ve had, I think something like five companies become unicorns or have over a billion dollar valuation just in the last year. That’s really incredible. What about on the regulatory front? So one of the things that is most sticky and most difficult to change is the US regulatory regime. And for the audience who maybe doesn’t pay attention to this every day, because they have other interesting things in their lives, the key difference between the US regulatory regime and that of most of the rest of the Western world is that lawyers cannot share profits from the practice of law with non-lawyers in the US.
However, we have seen a few states loosen those rules and allow for what they’re calling sandboxes to play with other models. How do you see that playing out?
You know, it’s going to be an interesting development. I think the regulatory scheme in the United States, because it relies essentially on different regulatory environments within 50 states is going to be very difficult to change in a material way. I mean, you referenced Utah, Sandbox, Arizona is doing work. California is looking at it. Maybe if a big state like California or New York, Illinois makes a significant change, others will follow. And certainly if regulatory foreign comes, it’ll hasten innovation because it’ll bring it, I think another influx of other viewpoints and perspectives into the industry that’s starting to happen already.
But I think there’s plenty of room and you’re seeing it in the tech, go back to the tech investments. There’s plenty of room to run even under the current regulatory environment. Yes, you can’t share profits with non-lawyers and you have to be careful about the practice of law by a non-licensed personnel, but there’s a lot of opportunity in this space. It’s a big market. It’s very fragmented. Nobody owns the kind of percentage that consultants do, for example. And so there’s a tremendous opportunity for continued investment and growth, even in the absence of regulatory reform, which I believe will come at someday, but it’s going to be down the road.
Yep. So, perfect transition. You’re doing my job for me as usual. You mentioned the big consulting companies. We’ve had some lively debates about the Big Four. I spent some time at EY Law where I saw some very, very interesting work being done and I’m excited by what they can do. But obviously with the regulatory regime changes, then it’s going to be particularly interesting for the Big Four. How do you see that playing out and how do you see like law firms reacting or preparing for that? I won’t call it an inevitability, but a probability that it will slowly but steadily change.
Yeah, I think first you have to think about what are the advantages and disadvantages the Big Four have in a different regulatory environment? There are still regulatory issues operating in the states with their auditing function and the ability to provide other services to companies who otherwise audit. So they’re still governors on their ability to grow the practice. On the flip side, yes, they have huge amount of capital to invest. But the difference to me largely relates in a multidisciplinary mindset that my perception is the Big Four have is a built-out consulting practice, the ability to draw on different disciplines to solve solutions, business problems for their clients.
That’s a mindset that I see beginning to creep into traditional law firms, as they begin to use allied professionals to deliver value to clients. But I encourage all law firms to think more deeply about how you can develop a multidisciplinary mindset, not just to prepare for the inevitability of Big Four competition, which I do think is an inevitability, but because that’s what clients value, they’re looking for solutions to problems that are plaguing their business. And if you can bring a group of mindsets to solve those business problems, you’re adding value to your clients, whether it’s through technology, whether it’s through other disciplines working with lawyers, that’s the holy grail to me.
I feel like labor and employment, which is your pedigree has a lot of ability to work legal and non-legal services and technologies together. Could you give the… I think for some people, it is not obvious what that would mean to work in a multidisciplinary fashion. I mean, could you just give the audience like an example or two of what it might mean for like an LMA client, for example?
Well, for example, some of the disciplines we’ve either worked with historically or currently work with, you’ve got a technologist. We’re trying to craft solutions with lawyers for client problems and client needs. You’ve got data scientists that are beginning to look at analytics around in the labor and employment law space movement of people, whether it’s through immigration, whether it’s through pay equity, all the issues that really revolve around the treatment of people in the workplace to get ahead and make data-based decisions. We’ve even gone so far as over the years work with psychologist and psychiatrist in organizational behavioral characteristics. They’ll think about how to manage the life cycle of workforce restructurings, reductions in force, building back staffing, hiring consultants. I mean, in the labor employment space, you’re talking about all those things that touch humans, and that’s a complex problem. It’s not just a legal problem. It’s raises all the things that people raise.
Yeah, I think that’s a great answer. So we have this legal tech world. It is exploding. We’ve been describing it as a Cambrian explosion of innovation. As of last count, there was something like 6,000 companies that would bucket themselves in the category of legal technology. Many of them, at least in my experience for the first time ever are shovel-ready. They actually do bring some value, right?
Mm-hmm (affirmative). Yeah, that’s a new dynamic, but yes, you’re right.
Yeah, it is. For the first time, I think it is worth people’s time to be constantly scanning that environment. But of course, with 6,000 companies and more coming online every year, that’s impossible. So there’ve been a lot of articles recently about legal technology companies being a bit of a pain in the you know what, with cold calls and emails and all that stuff. I agree with that. I think aggressive sales can be a pain in the you know what, but I put it to you having run almost every aspect of one of the world’s great law firms. How did they cut the Gordian Knot then? Like they have this great idea. They actually can help these firms. What should they be doing to get in front of the right people at firms like Seyfarth and show the quality that they have without driving everyone nuts?
Yeah. And a couple things, one, they should drive folks like you nuts because we rely on the wisdom of trusted intermediaries to vet this out. And I think the business model of LexFusion is a great one for that. I also think that they need to be more focused on relationship sales. I mean, the cold calls, the emails across the transom rarely get, for example, my attention, but if I may talk to you, or I may talk to somebody in a similar role in another firm, the guys at SeyfarthLabs keep track of various startups and it’s like anything else. If someone else is recommending, hey, you should look at these guys because X, Y, and Z, you’re probably going to at least… You’re going to at least have a conversation. You at least can take a look at it, but otherwise your voice is going to get lost in the clutter.
Yeah. It’s a very tough problem. Also, most companies have an entire buying function, whose almost entire job is to be out there vetting the various vendors. And that rarely exists in firms who, like you said, they don’t have the type of market concentration that even the Big Four have, which is even less than the consumer products world, where often you have a Coke and a Pepsi. You don’t even have a Big Two or Three. I try to ask that question every time, because even someone who has been pretty successful at it made it through a career without I think ever doing a cold call.
I do sympathize with new companies with great ideas because everyone says, tell them not to do it, but if they don’t have relationships, they’re cold calling someone, maybe they’re cold calling me, which is fine because it must’ve been, but some calls need to be made. So we’re running out of time. I want to end with your thoughts kind of on the future. I want to at least touch on the pandemic. The pandemic has, I think, opened the minds of a lot of lawyers that a lot of technology is not as complex and life changing as they expected. Some of it just makes your life easier. Do you think that the pace of change will accelerate in part because of the cultural changes brought by the pandemic?
I hope so. I’m expecting it to. We certainly have seen it. If you go back to the recession of ’08, ’07, ’09, I think you saw an initial burst of change and then a slowing down of that changed dynamic. I think this one’s particularly given that the pandemic continues to drag on for longer than any of us would like, I think it’s solidifying the pace of change in a different way than the Great Recession. I think people have gotten used to technology. Let’s be honest a lot of these technologies existed pre-pandemic. It’s just the adoption phase was much slow. And now people have been forced into adoption, video conferencing, collaboration technologies. And I think that’s going to stick. And I think you’re going to continue to see the pace pick up as people realize that technology can be an enhancement to their delivery of services and their own life.
Yeah, I’m with you. I’m optimistic that it’s open people’s minds to doing business remotely, to working with offshore teams, to being on the cloud and that it will accelerate the pace of change in a way that’s more sustainable than the last recession, which also had similar impact.
Right, I hope so.
Well, Stephen Poor, thank you so much of all the work you’ve done at Seyfarth and for many years, and really appreciate you coming on the show.
It was great to be here. Thanks for having me, Joe.
Awesome. And to the audience, thank you and see you next time on Future Law. Thank you Litera for putting this together.
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