Do Law Firms Operate on Principles of Capitalism or Totalitarianism?

I was having a beer at Right Brain Brewery last night with a friend who graduated from law school and then went to work for a large corporation.  We talked a little politics, both local and national, and about large corporations-both law firms and other companies.  Chris noted that his biggest disappointment as he rode up through the corporate ranks was his realization that most of the people at the top were idiots.  What kind of incentive system have we put in place when the most conniving, connected, egomaniacal and self-absorbed people often are the ones who run the show.

I always chuckle when I hear people talk about capitalism as though it is this “single thing” which we have achieved in the United States of America.  At its core, capitalism is about incentives and rewards.  The flavor of capitalism which has been practiced over these last many decades has rewarded political maneuvering, power grabs and “being connected.”  None of these traits are ones which I believe provide fuel for our economy. 

Over a good conversation and a couple of beers last night, I realized once again that the internet and technology offer levels of potential in the areas of innovation, talent, intellect and work ethic which could drive us closer towards the capitalistic ideal.  I just happen to be lucky.  I work in an industry where innovation is largely stagnant.  But honestly, there is not a lot of competition because most law firms spend tremendous energy simply trying to keep things about the way they are today.  That is, the way things have been for the last decade or two.  Because there is a lack of advertising in the law (which any analysis would tell you is simply there to preclude consumers from identifying options), lawyers and law firms operate in their own little mini market.  This market is largely insulated from outside forces which would incentivize innovation. 

I have met some truly innovative managing partners in my day.  But the vast majority of firms are run by people who, by any objective standard, have no business at the top.  Then again, many of them have accumulated power, made it rain with clients based on their social connections or worked to the endless hours which are the current measure of success in law. 

Comments

[Patti Spencer]

I think the mindset against innovation and creativity comes fomr the organizational structure, not the economic model. Having worked both in a banking corporation and law firms, I can tell you that those who rock the boat with new ideas, whether for bad or good, are penalized in the hierarchical system. Only organzations that reward creativity will succeed in the new marketplace.

[GAL]

Patti:

Interesting observation. There's no doubt that large companies are at a huge disadvantage in so many ways. Many large companies (leaving out ones like Google) simply do not creativity or innovation. You are correct that “rocking the boat” is often disfavored within large organizations. Obviously, this tends to diminish the possibility of innovation.

I’d be interested to hear more about your thought that organizational structure is a barrier to innovation. I’ve have been focusing on incentives. Google has incentives in its system for creativity and innovation. Thinking “outside the box” can result in direct rewards by way of compensation and status within the Google culture. But most large companies, and certainly most large law firms, are the antifascist of the Google approach.

Because law firms and lawyer exist in an extremely insulated world which is a mystery to the average person or company, innovation will certainly not come as a result of client demand in most instances. Consumers, both businesses and individuals, often learn about their options within the market as a result of advertising and marketing. While consumers don’t believe everything they read and hear, they do get a sense of what market options exist and what matrix might guide their decision.

Those of you who follow this blog know I am a tremendous proponent of law firm advertising. While there needs to be continued regulation on the personal injury side, it is stupid to believe that companies will somehow be deceived as a result of more aggressive attorney advertising on the web, TV, radio and otherwise.

For instance, what if our firm took out a national radio campaign attacking the hourly billing method and offering our flat fee defined deliverable method as an alternative? Some would say that it’s inappropriate for lawyers to advertise. These are the same people who are billing by the hour and never want consumers to know their options.

Most consumers are not looking for a value-billing law firm. They search for expertise. The ones who find us happen to “stumble into” our flat fee defined deliverable approach. They find us as a result of luck, not consumer demand.

I always say that the moment other law firms start offering flat fee defined deliverable services will be a good day for our firm. Once there are other alternatives in the market, there is more likelihood that consumers will start to realize they do have an option.

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