In this edition of Law Technology Now, Dan Linna welcomes Ralph Baxter, who joins Dan as a new host of the podcast. Dan and Ralph take a deep dive into trends and changes in the legal industry and consider the outlook of the profession. They also discuss Ralph’s career as the longtime Chair and CEO of the Orrick law firm, his run for Congress in West Virginia, and his continuing efforts to bring innovative business strategies and technology to legal services.
Ralph Baxter advises legal technology companies, law firms, corporate legal departments, and law schools, to help modernize the way legal services are delivered.
Special thanks to our sponsors, Headnote.
Law Technology Now
Welcoming New Host Ralph Baxter
Daniel Linna: Hello. This is Dan Linna. Welcome to Law Technology Now on the Legal Talk Network. Today, I am live at a conference in San Francisco with my guest Ralph Baxter.
Ralph served as Chair and CEO of Orrick from 1990 to 2013. He launched many innovations including the creation of Orrick’s Global Operation Center in Wheeling, West Virginia and changes in the firm’s talent and pricing models.
Today, Ralph writes and speaks about the delivery of legal services and regularly advises law firms, legal technology startups, and corporate legal departments on their strategies and execution. He serves on Intapp’s Board of Directors, LegalZoom’s Legal Advisory Board, and too many other boards and named them all.
And finally, and most important to our audience, soon Ralph will be joining us on the Legal Talk Network as a host of the Law Technology Now Podcast.
Ralph, welcome to the show.
Ralph Baxter: Dan, it’s a pleasure to be with you this afternoon.
Daniel Linna: Well thanks, Ralph. Now before we get started, we want to thank our sponsor, Headnote. Headnote helps lawyers get paid faster with their compliant e-payments and accounts receivables automation platform. To learn how to get paid quicker and more efficiently, visit them at headnote.com.
All right, Ralph, well, let’s just jump right in here now. You spent 40 years at Orrick and the last 25 of them as a Chair and CEO, and for retirement you apparently decided to go out and run for Congress in West Virginia?
Ralph Baxter: Right.
Daniel Linna: Tell us a little about that.
Ralph Baxter: Well, first of all I deny retirement. I had no intention of retiring, but I had done — I had been in big law, I’d been a Chair of a great law firm, at least long enough, and maybe a little too long, but at least long enough and it was time for me to do something different. But I had no intention to retire and I didn’t retire and I spent several years after Orrick working in other ways on legal service, maybe we can get into some of that, but then I did run for Congress in 2018 and it was the experience of a lifetime.
I have always cared about public policy, but I had a day job, I had things that consumed my time and energies. Once I was done with Orrick, I was free to do whatever I wanted to do and so I realized something that was maybe not a dream of mine but something I’d always cared about and put my hat in the ring and ran for public office. And those were some of the best months of my life.
I woke up every morning feeling good about myself because I had one objective and only one objective in mind and that was to help make the United States better by joining as a member of Congress and helping Congress do a better job of being rational and dealing with all of the issues that the United States confronts.
It didn’t work out because democracy works in the way that it works, the people get to decide, and in West Virginia they decided that they wanted a very liberal agenda in a very conservative state, I was running a centrist campaign, and now I’m back to doing what I know how to do, which is help change the way legal service is delivered.
Daniel Linna: Well, what do you think, is there a chance you might go back and run yet again?
Ralph Baxter: No.
Daniel Linna: I mean, it’s pretty common that people lose their first election.
Ralph Baxter: Right. I did learn — it is common and I did learn. People kept telling me during the course of the campaign, really, this is your first campaign, you can’t possibly win it, and I thought I could, and I do think I might have won the general if I made it through, the primary. But I entered it believing it was a single elimination tournament.
Running for public office we should appreciate every person who was willing to step up and put aside the rest of their lives to run for public office. It absorbs everything in you to run for public office and it absorbs everything from your family as well and it takes you away from your family.
So the arrangement my family and I’d come to was that I was entering a single-elimination tournament, and if I had won in the first round we would have gone on through as far as we could go and I might have done that for the rest of my life. But we lost in the first round and so I’m out of the tournament, like the NCAA Basketball Tournament, and I’m back to what I do know how to do. And I have never been more jazzed about what I am doing in law than I am with this and I’m delighted to be doing it again and intend to do it far end of the future.
Daniel Linna: Well, you mentioned about doing some things with improving legal services delivery in between kind of Orrick and before you ran for Congress. Tell us a little bit more about that.
Ralph Baxter: So when I was done at Orrick, I pushed myself out of my comfort zone. I’ve had a wonderful career and I was blessed to spend all of those years in big law and I learned a lot from it, but there is so much of the ecosystem of the legal service that I really hadn’t experienced.
So I deliberately pushed myself into situations in which I learned about legal technology which I knew how we consumed it at Orrick, I knew how we used it and we pushed pretty hard, but there was so much more I needed to know. I learned about law firms of different shapes and sizes than the Am Law 100 which I didn’t really know much about the mechanics of them and the cultures of them and so on. I learned much more about the corporate legal department side of things enabled mainly by clock, because clock is like an Emporium, you can get involved in clock and get a really complete picture of how the modern legal department is thinking about accessing legal service and then I got deeper into public service.
One of the things that I concluded for my campaign is I never again want to be away from activities that are in the public interest, although I think the things we’re doing in legal are in the public interest. And so I joined some public interest organizations to work on those, and then of course I work with Stanford and Harvard in their centers on the legal profession and CodeX. So that’s why I jumped into all those things and enjoyed it and Thomson Reuters, which you mentioned.
So I started doing those things. I learned the ropes, and now I’m back and I know a lot more of what I’m doing in all of those dimensions and that’s what I’m doing now.
Daniel Linna: So, Ralph, you became the Chair and CEO of Orrick in 1990. I remember when I graduated from law school from University of Michigan in the early 2000s and it was a second career for me and I remember getting out and starting practicing and I realized I really don’t know anything about the way law firms work or how they’re run and so I looked for a book on law firm management and I remember I found this book and it was titled, “The First Myth of Law Firm Management is that it Exists”.
And so I read that book and I started learning a little bit, but I mean I think to the point why I wanted to get to is in 1990, I have — my sense is that law firm management involved tremendously during your career from 1990 to today.
Ralph Baxter: Right, right.
Daniel Linna: Can you just kind of tell us about that?
Ralph Baxter: Well, it did. Some firms of course were very well-managed and thoughtfully so. Some of the firm’s that became most successful in the early days, like Cravath, had a real thesis of what they were trying to do and managed to it, and a number of firms around the country did, but most firms were not well-managed. They weren’t very big for one thing, firms grew enormously during the time that I was Chair of Orrick, and in fact at one point I realized there wasn’t anyone to whom we could turn for guidance about how to manage a law firm.
Orrick had hired McKinsey for a study before my time and that had been very helpful in reorganizing Orrick. In fact, a lot of the structure that I was able to use in leading the firm when I was CEO of Orrick had been created on the recommendation of McKinsey at any rate.
So we created the Law Firm Leaders Forum back 22-23 years ago in order to have a place where we could get together with the other people who were running law firms, none of us who really were trained to run businesses and our businesses were getting bigger and bigger, to talk about the issues that were cutting edge for us at the time.
And at the beginning we talked about things like developing a strategic plan. I had a panel of our program in which one of the managing partners said on the panel, well, we don’t really have a plan and that wasn’t really out of keeping with the way some firms were at the time.
So over the years we all learn together how to manage and lead law firms more which we had to do because they became quite large enterprises, and as we know, not everybody did, because there have been a lot of law firm failures over the course of the last 25 years.
Daniel Linna: Yeah. Well, so you mentioned that some of this work that you’ve been doing lately is kind of surveying the landscape, and most of the large law firms now they have multiple people in the C-suite, so it’s not just a lawyer as a managing partner, there are other professionals. I mean, what else would you — where do you kind of maybe see a change in the way looking at the Am Law 100 versus the 200 and in just the management structures and is there still more room for if we need even more professional managers in law firms of all shapes and sizes?
Ralph Baxter: Well, the room for improvement is not so much the structure, but we need to change the fundamental business models of the law firms. So law firms have made quite a lot of progress in the personnel, in the people who have been given some responsibility. Although they still continue to limit more than I think law firms should, the authority of Chief Operating Officers, Chief Marketing Officers, Chief Technology or Information Officers and so on.
They have such people, they are professionals and just back to a history for a moment, there was a time in this evolution of law firm leadership when the firms would bring in a professional to be in-charge of finance or operations, or something and then just not be able to cope with the idea that someone was in, telling the partners, telling your firm what to do and those early hires often failed.
But today the firms are quite good at it. I just this last week was surveying the people in chief marketing positions across the largest law firms in the United States and it’s a quite professional group and knowledgeable, and thoughtful, and increasingly empowered in the law firms.
I think the big changes that the law firms need to make have to do as I said with the fundamental model. The model is out-dated. I mean — so just digressing here for a second. What law firms need to do and what all of legal service needs to do is modernize and it’s a word I’ve come to because it’s a relatively neutral word and innovation often has an implication of technology as a principal solution and it may be. But really what needs to happen is that the law firms and other large providers of legal service need to rethink what is the best way for us to organize all of our resources to assemble and deploy resources to pursue the objective of optimally serving the clients and that almost certainly means thinking about how you structure the service that you’re going to deliver at the service model, it almost certainly means changing the resources that you assemble and deploy, for example, the traditional law firm is staffed entirely by licensed lawyers who are on track to be partner or are partner in a law firm.
All production is done by such people in the most traditional model. That means, in a large city the least expensive means of production you have in the firm is $200,000 of cash compensation to begin and then it goes up from there with and so on. Instead, the model of the law firm likely should be a different mix of human beings, fewer on-track partners of the entire lawyer court set with careers for people that are not on track to partner and have different expectations and different costs associated with them. More human beings who are not licensed to practice law and more technology, for example; and those are the kind of changes I think are on the horizon and really need to happen. And I think we will be able to see that real change is underway when we see changes in those dimensions in the financial model, the billable hour, the pricing model, and the investment model. Those are the places that I think we need to change.
Daniel Linna: Well, as I’m listening to you, say some of these things, Ralph. I think one of the things that strikes me is when I talk to law firm leaders today, I think it strikes me that many of them get it, many of the leaders of these law firms, but yet it’s enormously difficult to actually bring about these changes inside of the law firms. So, I mean, if it’s not you’re a Jack of all trades, and you can just decide who stays and who goes, that’s why it’s a bit of a different challenge.
Ralph Baxter: That’s right.
Daniel Linna: What would you say about that, the change management process?
Ralph Baxter: Well, it is, you just said it exactly correctly. You are not running General Electric decades ago. You are running a partnership. These law firms were not designed to be billion-dollar businesses, so it’s just a fact and when we think about these problems, sometimes the answers are so obvious and that’s one of them. The law firm was designed to be a small organization of professionals, that with informal processes for everything, billing everything, right?
Daniel Linna: Yeah.
Ralph Baxter: And today, just staying with big law for a second, these are very large complex businesses and they need to have all sorts of process and procedures but there’s still partnerships, and even if they’re professional corporations they run like partnerships and so the decision-making is not command and control, the partners will not put up with that. It’s just not going to be the way you have to run it, that’s why the person who is in-charge of a law firm, the person who has the senior-most position, needs to be a leader. You can’t have partners do what you have concluded they need to do because you tell them to. In fact, this is not a bad thing. Lawyers need to be independent.
For a lawyer really to do what the clients need him, her, them to do, the lawyer must be independent, decide what the best course is and stick to that decision especially when it’s an ethical question or something like that. And so, there’s always going to be that tension in a law practice or any professional service firm, but a partnership has additional challenges to it.
So, anyway, that’s a huge challenge and so you have to learn to live with it, and I don’t think it’s going to change, I think you just learn to live with it and you learn how to lead. Inspire your partners to see that it is a better way and what we’re talking about will make the kinds of changes that all of us are talking about, will make life better, outcomes better for everyone. We’re not talking about something that some superficial efficiency project that somehow just moves the cost a little bit or something like that. We’re talking about fundamental changes that enable the lawyers and the law firms to serve the clients better, that enables the clients to access the legal service they need in a way that’s more responsive and more cost-effective, that enables the law firms to make more money, nothing we’re talking about will — right?
Daniel Linna: Yeah.
Ralph Baxter: That enables the lawyers to enjoy their careers more, enables the law firms to have lower turnover of their associates, enables the law firms to create careers for people who are not licensed to practice law, that are very rewarding careers, that make more money than they can make somewhere else instead and cost the law firms less than the law firms are now paying for the human beings that are doing the work now.
All of it is better, society is better off, the rule of law is more stable, it’s win-win in every way but the change is going to take some managing and some leading, but everything we’re talking about, all of these changes are ones we should be able to lead everyone, all the stakeholders to embrace, but it’s going to take leadership, it takes leadership even with the clients. We’re going to go to different ways of doing this and the clients need some educating and some leading just like the lawyers do too.
Daniel Linna: Ralph, I love everything you’re saying there and it frustrates me sometimes because this conversation, we think about it, it’s a fixed pie and we’re losing something as lawyers, it’s about the boring commoditization message versus thinking bigger and all the things we can do in the industry and then the way that we can improve access to legal services, improve rule of law, those sorts of things and I think we’re generally talking about leadership inside of organizations but how do we change the messaging around this more generally and get people in the profession, the industry more excited about the opportunities out there for us?
Ralph Baxter: Well, so there’s another dimension of impediment to that that we need to get on the table. Lawyers especially in the Am Law 100 are making a fortune and as everyone says, in whatever way, humorous way, they choose to say it, it’s hard to convince somebody they have a problem when they are making 1.6, 1.82 million dollars a year, so that’s part of the problem.
Part of the problem is, the lawyers are great at what they do. They’re great, they’re well-intentioned, so the best of the lawyers are successful. They wake up every morning, highly confident that they’re going to go off to the office and do a great job for their clients. So there’s not a built-in incentive for them to change. We’re talking about an issue that requires, as I said before, leadership, education, and part of it is simply there is a better way and we need to appeal to our partners and all of the people in the ecosystem that there’s a better way, but part of it is change is going to come, one way or another.
At the recent American Bar Association meeting in San Francisco, there was talk all over the City of San Francisco about how the change is coming, because it is. The market is restless. The market knows, it’s not getting the legal service it needs. Some of the market is not getting legal service and part because they don’t even know they need a legal service. I mean, the consumer market is being underserved in ways that they don’t fully know all of the time, but in the commercial market, in the corporates, they know that the service they’re getting is not as responsive as it could be, it’s not as fast as it could be, it’s not as transparent as it could be and it’s certainly more expensive than it needs to be, they know that and they’re increasingly looking for alternatives that’s why the growth of headcount in corporate law departments it dwarfs the growth and headcount in private law practice. So change is coming.
As I heard someone say at the ABA meeting, this is going to come either voluntarily on the part of the law firms or the Bar associations; the Supreme Courts and the Bar associations are going to change the rules or politicians will, and that given the current cast characters is not our best alternative. We need a thoughtful resolution.
So part of what can be done to lead everyone to this better day is education and leadership and part of it is causing people, helping people understand that the market will not put up in these unsatisfactory responses to their needs forever. A day of change will come, we might as well embrace it and adopt new approaches, new models that make things better for everyone and we can do it on our terms.
Well, I want to ask — go back to Orrick just for it, but I want to ask one more question kind of on this topic because you just mentioned, and actually I’ve heard Jim Sandman mentioned this before it at his CodeX talks about one way in which the industry could change and that would be the politicians decide they’re going to step in and change the way the regulations work and especially given your recent run in politics I’m kind of, why hasn’t that happened already? Sometimes it surprises me that someone hasn’t run on kind of a platform of saying we’re going to fix this problem because the lawyers are moving fast enough to do it themselves.
Ralph Baxter: I don’t think — there’s a lot of answers to that, but just staying at the level that you’re asking it, I don’t think this issue has captured the imagination of the general public. This is more an issue for those who are corporate leaders, businesspeople, and even there they don’t have as much clarity and they don’t have to resolve but I think they should have.
And when it comes to consumer law, part of the problem is that it’s only those — it’s a small band of people who really focus on this issue and understand it and Jim Sandman is one of the leading examples at the Legal Services Corporation, so I think that’s really the answer. There’s plenty of other answers. The politicians — well, there’s plenty of other answers, but I think that’s the core reason.
Daniel Linna: Yeah. Well — okay, so going back to Orrick one of the things you’re credited for is that when you took over Orrick, most people would say it was mostly a California-based, I don’t know if I’d say a regional firm, but US firm and then it grew into an international behemoth during your time. Looking back, well, I mean, what would you — what are the most important things kind of in that tenure that really put Orrick on that path, the innovations that you put into place and the changes made while you were at Orrick?
Ralph Baxter: So, part of it was fortuity. The law firm had experienced an off-financial year when there had been a major change in the law that affected our then largest law practice group. And so the firm experienced a reduction in its income to the partners. And that put people on notice that something bad could happen if you weren’t careful or something like that, and that was actually is what led to me being elected at an age that was highly uncommon at the time. I was 43-years-old. So that — there was a setting in which the platform had a little fire under it by virtue of that one sort of happenstance.
So a second sort of fortuitous development was that major law firms from other parts of the country discovered San Francisco, and so they were coming into our market and what had been a market that belonged to a handful of large law firms in San Francisco was now the target of competition from other outstanding firms coming from New York, Los Angeles and so on.
So those things together gave us a foundation for understanding that we couldn’t just sit there playing the game the way we always had, and that was really helpful. And then I said to the partners, well, the only reason I can imagine that you elected me at age 43 who was — I was a labor and employment lawyer, I wasn’t a corporate lawyer, I didn’t have a background in management was that you want to change. So let’s have some, and so we did.
And so we took it as a mandate to change some things that led us on that path and from the entire time that I was leading Orrick and I think it’s still fully true today, Orrick regarded the world, the marketplace, the client’s needs as something in transition and that was dynamic and that we needed to be dynamic with it.
So we thought through what — where do we need to be, what do we need to be able to do to have the position in the future that we had back then, which was a very strong position in a regional market. And so we imagined a geography, we imagined a set of practices, we imagined a set of clients and over the course of time we changed much more than just our geographic footprint.
We changed significantly the practice areas in which we specialize, we changed significantly our depth of penetration of industry sectors. We lifted the value of the engagements we did. When we were just a regional firm, we had a much broader array of matters we would do from relatively low, matters at stake to much higher matters at stake and we oriented ourselves progressively to higher and higher value engagements so that we were competing regularly now with firms that were regarded as the leading firms in every market in the United States not just in our San Francisco market. So we had a strategy and we pursued it.
Daniel Linna: And I know one piece that I mentioned in the intro was the Global Operations Center in Wheeling, West Virginia, and I think you were talking earlier about lawyers not having processes and kind of like doing things with everyone, they have their own way of doing things, of course to outsource that way things need to change. Can you just tell us a little bit about that how that?
Ralph Baxter: Right, I think without a doubt, that was the most significant thing we did during the time that I was leading Orrick and it had lots of implications. We started as a simple idea that the rents in San Francisco were then getting as high as they are today way back then which was the late 90s. So we thought, well, we certainly, we could save some money by putting some of these functions and it was the dawning of the information age, so you could do things remotely in a way that you couldn’t have done ten years earlier than that.
So we decided that we would consider establishing a center somewhere, initially we could only think of a handful of jobs we could move, but as we went through time the number got larger and larger and we ended up organizing this Center in Wheeling, West Virginia, which we chose because they were the place in the country that both got it better than anybody else at the time and it was a place that we knew had a workforce that we could rely on which turned out to be true.
And so we moved some number of functions. We had about 70 jobs. We moved to Wheeling, West Virginia. But as we went through the process we learned that not only could we save money, we could do things better. We would have real synergies bringing all these things into one place, would give us real synergies and so we did that and it worked phenomenally. We saved a lot of money, we did all sorts of other things. But, along the way we also learned about communication, because this was going to be a big change. This was going to be unsettling, and including there were going to be 70, 50, 60 some number of people would have their positions changed at the minimum and maybe they would lose their positions.
And so we launched a communications program to make sure that everybody understood what we were doing, why we were doing it, how we were going to make sure that the impact on any of the incumbent people was as limited as possible, and from that we made the morale of the firm stronger, but we also learned better how to communicate across a firm which by then had become a firm, there was a multi-jurisdictional firm, a multi practice firm, what was much more complicated than it had been back in 1990 when I first was elected, and the lessons we learned about communicating served as well for the rest of time that I was at Orrick and are serving Mitch Zuklie my successor and the leadership team well today.
Daniel Linna: One of the interesting things about looking at large international law firms is you see that no one really has captured a large percentage of the marketplace and so I’m just — I’m kind of wondering if you’re leading a law firm now, one of the top ten law firms in the world, let’s say, is anyone out there kind of looking at the market and saying we have about 1% of the market, man, we could triple the 3 or maybe even 5% or 10%, I mean is that potentially a game plan you think for a law firm?
Ralph Baxter: Absolutely. Every major law firm should be thinking about market share which starts with, so what is our market, what market are we pursuing? So right — which isn’t the entire market. Every law firm should be thinking about the value of engagements from low to high that it was pursuing, the industry sectors, the practice areas, the places in the world and the firm can come to a definition of market its pursuing and then it should quantify what share do we have now and what share would be an acceptable share? That would be an outstanding way for law firms to think about it and I’m sure some of them are.
They shall also should be thinking about their principal clients and what share of the clients’ spending should they be capturing? That’s a client market effectively. Yes, they should be thinking that way.
Daniel Linna: And you were talking about the corporate legal department, the number of lawyers being hired by corporate legal departments. When I practiced I worked for it, did a lot of automotive supply chain work. So thinking about outsourcing and then off-shoring and near-shoring, all these concepts, and I’m just kind of curious why you think about — this is a phenomenon we don’t see in other areas, right?
If you are General Electric, if you are General Motors, you tend to think about, well, what’s our core competency? What are we really good at and building a law firm inside of your company is usually maybe wouldn’t be high in the list, 00:30:15 want to do.
Ralph Baxter: That’s right.
Daniel Linna: So, I mean, I think, if I was back in the law firm, that’s the other thing I’d look at and say, well, there’s an opportunity here for us, right? The companies might be taking more of this work in-house now, or we can win some of that back. Now, there’s other players, there’s the Big 4 and Alternative Legal Service Providers and I mean, but what do you think will really happen over time with the corporate legal departments and these new players?
Ralph Baxter: Well, it’s the great thing about capitalism. The more freedom to compete, we create and then I think we do need reform in the rules to let more people compete, let more human beings be part of legal service and let some investors invest and all those things that are being considered now, but we will see it play out in a way that ultimately will be, that’s the way capitalism works, it will be better for the market because the market will make choices.
So you make a very good point about corporate law departments. Those are cost centers, they’re not the core competency. Those companies are not in the business of legal service, they’re in the business of whatever they’re doing, but they’ve made a choice to bring these very significant portions of their legal service needs in-house. Some of that, they will do forever.
Daniel Linna: Sure, sure, sure.
Ralph Baxter: It made sense, it always made sense to buy some and not as much as they have. So 25% maybe more of the market today is in-house. If you were a car manufacturer, and 25% of your customers were making their own cars, you would know, right? You would know you had a problem.
Daniel Linna: It’s a good example.
Ralph Baxter: Right, and so the law firms should be thinking, and as you say there will be other competitors competing for that share as well but should be thinking about how do we best persuade our clients that they should build on our experience together, our mutual trust, our mutual dedication to get to a result in which we do at the law firm more of the work and take that off of their cost sheet, the expense side of their income statement and do it in a way that makes sense for them. They’re doing it in-house because turning to the law firms is not working for them. So it’s an easy way for the law firms to think about why they need to change, let’s rearrange our model and other things so that we can deliver that legal service in a way they will find superior to doing it themselves.
Daniel Linna: That sounds like a great plan. I want to come back to this point on competition, but first before we continue our interview with Ralph Baxter, former Chair and CEO of Orrick, we are going to take a break to hear a message from our sponsor.
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Daniel Linna: And we are back. Thanks for joining us. We are with Ralph Baxter, former Chair and CEO of Orrick.
Ralph, before we went to the break, we were talking a little bit about competition in the marketplace and there’s a lot — we’re in California right now, a lot going on in California with the talks about the changes to the regulations potentially. I want to ask you a two-part question. First of all, what do you think ought to happen, which is best for the legal marketplace writ large and then I want you to think about your perspective of running a large law firm, like how do you think it would impact large law firms, how should large law firms be preparing for, what could be coming?
Ralph Baxter: Right. Those are both really interesting questions. So I think that we should find a way to make two fundamental changes and then there will be some corresponding changes we may need to make to adapt to those changes, but one is, we should liberalize the range of human beings who are permitted to participate in the delivery of legal service. We should eliminate the risk that someone doing parts of the work that are embedded in legal service is somehow violating the rules against the unauthorized practice of law, and I think there’s a lot of other changes we need to make about the way we think about that fundamental question, but what we need to permit, human beings who have the intellect and the interest in the character to be participants in delivering legal service to join the licensed lawyers who are part of legal service.
And I think that for a lot of reasons, some of which are, it will drive the cost down and enable legal service to be delivered in a more cost-effective way, but perhaps more important, a more diverse set of people, with different backgrounds, different perspectives will be able to come up with better ideas about how to serve the clients based on the legal knowledge and thinking that the lawyers bring to bear. But based on the concepts they have developed in their lives, in other ways, in engineering, and finance, and accounting, and project and process management, all the other kinds of disciplines we might bring together.
But one change is, permitting more people than just licensed lawyers to participate, but the other is permitting ownership or investment in law firms and legal service companies by people who are not themselves licensed lawyers. That made sense perhaps at a different time, I don’t think it makes sense today, and certainly when it comes to legal service for the consumer, for the individual who has small stakes matters, like a landlord-tenant dispute or a family law, or an immigration law issue, that don’t have a lot of stakes to them, it’s almost impossible for law firms to make an economically viable financial model to serve those clients.
But if you had some investment and you could create an enterprise that had a broader reach, you could make — take the cost down with scale to serve that market. That’s what motivated the UK to make the changes they made and I think it should motivate the US lawmakers, regulators to make the change as well.
Daniel Linna: Okay. And then what about the second part of my question then, put your hat back on, your back in the big law firm and what do you think larger law firms ought to be doing to prepare for these potential changes in the workplace?
Ralph Baxter: This should hasten the day that they change the model in the ways that we were talking about before, certainly with a more liberal notion of who can participate in the law firm. It will be easier for firms to assemble human resources that have a higher portion of human beings who are not licensed lawyers, but who are making a real contribution to the service itself, not just the support of the service, but the service itself. So that’s one change that I think law firms should embrace as soon as the rules change, if they do change.
The other change they should embrace across the board is sharing the economic rewards of the law firm with the people who work in the firm, who are not lawyers themselves. Now, law firms misapprehend the model as it is, thinking that all of the income of the law firm is paid to the partners. That’s not so. The income, whether you denominated a salary or not, that you pay the lawyers is income you are deriving from the clients, and so I think the law firms now readily can broaden that category to share the income with people who are other professionals in the firm than the lawyers.
Now, the harder question is, do you permit an outside entity to invest in your firm. The experience so far in the UK is that they don’t, but we will see whether the large firms take some private equity investment in them, to enable them to make further investments themselves in expansion or something else and to distribute some value of the enterprise with the partners.
Daniel Linna: Well, not surprisingly there have been some objections by practicing lawyers to some of these reform proposals. Some people want to see more data or stronger data from the UK, some people are pointing to some of the changes or innovations we are seeing in the marketplace, like new law firms like Atrium and similar changes happening. Some people worry about the quality of legal services in the marketplace.
I mean what would you say — what is your response I guess just to some of these arguments that are being presented on, that we need to take it a little bit more cautiously?
Ralph Baxter: I don’t think we need to take it more cautiously. At the minimum, for legal service enterprises law firms that are serving consumers, it’s not going to work if we don’t permit them to raise some capital to build the infrastructure and the business model they need to serve clients with these relatively low value in terms of economic stakes matters.
And I don’t think — the idea that somehow you can’t be ethical if you have an investor, well, goodness, then we can’t have any pharmaceuticals, because you need ethics in pharmaceuticals and other kinds of enterprises. I just don’t buy it that the only ethical people are lawyers, I don’t or professionals.
So I think we can do this, we will do it with regulation, we will do it with oversight, and then if there is a problem, we will address it just the way that we do if there is a problem with the ethical behavior of lawyers.
I also don’t think we have to wait for somebody else to experiment and prove that something works. We are not talking about changes here that are that risky. When it comes to the personnel involved in delivering legal service, we already use human beings who are not licensed to practice law to do work that is embedded in legal service. It’s always been part of the history of law.
I was motivated to be a lawyer because I watched the television program Perry Mason. And Perry Mason had a three-person team and only one of them was a lawyer and they did just fine, they were ethical and they got great results, and they had a successful television program, right? But I think we know from history that we can do this with people sharing the work.
As to investors, I think that the ethics, the morality, the determination of lawyers is sufficient that we will be able to keep our compass aimed in the right direction in terms of morals and ethics even if we do have some investors.
Daniel Linna: What about law students and junior lawyers right now, I mean watching some of these changes and there is a lot of concern — a lot of junior lawyers have a lot of debt, if you are deciding to go to law school or you are deciding to take on a lot of debt. I see a lot of opportunities in the marketplace, but easy for me to say, I already have the degree, I don’t have to make that big investment again, some people aren’t so bullish about what the — where the profession may be headed.
This is predicting the future maybe a little bit, but I think — well, we have to do that first of all, right, to prepare for it, and some part of it is I think we need to create the future, some of that’s in our hands, but I mean what do you think — I mean what should students in law school be doing, what should junior lawyers be doing to prepare for the future?
Ralph Baxter: Well, there is a lot of different questions — a lot of different issues that they should be thinking about. Of course they all are thinking about all these issues, many of them, record numbers of them thought about these issues and decided not to go to law school. One of our problems with the future is the decline in the number of people going to law school and specifically the decline of some of the people who might have been the best lawyers choosing other careers. So it’s already happening. They are already thinking about that and they have amassed obscene amounts of debt and there is a whole other challenge. Why is that so, why is it so costly, but they have amassed this debt, so they are going to deal with that no matter what happens. So those are real problems.
I think the future that lies ahead is as likely as not to be better than the status quo. If you are graduating from law school, let’s say you did graduate from law school three or four years ago, it was almost certain if you went to a big law firm you were going to be doing a lot of work that has nothing to do with what motivated you to be a lawyer, all that intensive document review and all of those things.
The future that we have been talking about during this conversation is a future in which that work gets done by other human beings, that work gets — in a setting in which that, from their point of view, fits to what their ambitions are and their career plans are or is done by the technology. So I think there is a fairly good chance for people who are now in law school or contemplating law school that the setting into which they move will be more favorable for them.
But then there is this, the newest generation is much more ready to go into the law firms and embrace the kinds of changes we are talking about, to embrace the technology, to embrace collaborating with other human beings who they respect, who they don’t call non-something, who they talk to as though they are peers in the workplace with them, because they haven’t grown up in this tradition of law and they have grown up with technology. They have grown up with a new technology every week that does something different and they adapt and learn how to use it.
I think actually the current law students and future law students will have an advantage in the world ahead because of those factors that will offset some of the things that might concern them.
Daniel Linna: Well, one of the things that I think is a challenge is, when we talk about the legal market, we tend to generalize a lot and talk about the whole marketplace, or even if we start talking about law firms, we talked about the Am Law 200, there is certainly a lot of differences from the top to bottom there.
So I wanted to ask like about particular part of the law school marketplace and I taught at the University of Michigan as an adjunct, I taught at Michigan State, a lot of the success rate at Michigan State was we definitely had students going into big law firms, quite a few of them, some went into practicing attorney roles, quite a few went into project manager, legal knowledge engineer type of roles.
At Northwestern now of course, mostly what we are trying to do, most of our students want to be traditional lawyers in big firms and we see more and more of them building innovation skills, technology skills as being able to set them apart. But I think there is a lack of clarity in the marketplace about whether the big law firms really are starting to value those skills in their new potential hires or are they still just really looking down the US News pecking list and hiring based on that.
I mean what do you think, is this just aspirational, that hopefully the firms will start hiring for those skills or is it actually starting to happen?
Ralph Baxter: It isn’t just aspirational, but I don’t think the law schools should set their curriculum based on what they think the law firms are going to use as their predictors or criteria for selection. The law school should be training the lawyers in these other skills, because it will make them better lawyers, and that’s the job of the law schools to prepare people to be the best lawyers they can be. And that’s enough, that’s enough of an answer.
You said something in your question that was exactly right, the law firms are different one from another. In a way all law firms are alike, in other ways, in really important ways they are very different one from another, even if they are the same size and grew up in the same original city.
And so some firms do value these skills more than others, but law firms have a long, long way to go to understand how to hire, what to think about, what are the predictors of being a successful lawyer, and I think a lot of change will come because a lot of data is coming out about this, some of which has been assembled by our good friends, Evan Parker and Bill Henderson. So I think there will be changes in that.
But these skills that at Northwestern and some other progressive law schools are being taught are ones that lawyers for the future need to have, just as it was always so, that to be a great lawyer you needed more, to know more than the Rule in Shelley’s case. There are other things you need to know and we didn’t do a very good job of teaching those. But now there are these additional issues like process design and collaboration and technology and adapting to technology that successful lawyers will need to know.
Daniel Linna: What about leadership? I mean you have talked a lot about leadership throughout this podcast and your political campaigns, running a law firm, we graduate a lot of lawyers who haven’t had any exposure to any of the things you talked about and not leadership either?
Ralph Baxter: Right. So depending on the setting you are going to need to be a leader, you are going to need to be good at selling. There are other skills. So yes, that would be good too.
I mean selling, let’s take selling for a second. Dan Pink has written a book about we are all in selling. Teachers and preachers and jury trial lawyers are selling in the sense that they are trying to persuade the jury or whoever it is that what their client did was okay or whatever it is, and we have to teach and convince our partners to change or our clients to change and so on.
So yes, all those skills would be good to have, but some of these skills are downright necessary for a 21st Century lawyer.
Daniel Linna: Yeah. I like that example. I just think it’s funny about sales, because I know lawyers all the time, they will look at someone who has a big book of business, oh well, you know Sally is good at marketing and it’s like, what’s wrong with that, that is actually part of the description, to be good at what we do, actually knowing how to —
Ralph Baxter: That’s right, that’s right. So if you are a great teacher in the classroom, part of what you are doing is selling your students on the importance of learning, the importance of knowledge, the importance of the subject matter, that’s part of what you are doing. That’s how you get them to pay attention, that’s how you get them to do their homework. And if you are a religious leader, you are selling them on whatever the precepts of the religion are. So it is part of it.
If you reverse engineered how the most successful lawyers got to be successful, part of it was selling in the sense that they inspired the confidence of the clients, that they were the person who should be chosen to represent their interests, and part of it was because they were really good at representing their interests; of course the things that you lie awake at night as a child wanting to do as a lawyer, but if you can’t sell in the way that we are talking about it, you don’t have a client to represent.
Daniel Linna: Right, right. Well, you actually picked up on another thing I wanted to ask you about actually, when you started talking about education, I noticed you ended up — you got a master’s degree in education.
Ralph Baxter: Right, I had a job before law too, just like you, right, my second career.
Daniel Linna: And how did you end up pivoting and going into law then?
Ralph Baxter: Well, I always wanted to be a lawyer. I mean I am not kidding about Perry Mason and I just loved the prospect of cross-examining the witness and getting the witness to tell the truth, which I did in my time as a lawyer.
Daniel Linna: That’s the thing I miss most, by the way, like I think from practicing, yeah, being able to cross-examine.
Ralph Baxter: Right, yeah, I agree. But that was the allure for me. So I finished college, I wanted to do some public service and so I joined the Urban Teacher Corps in Washington D.C. in the late 60s; when I got to Washington there were tanks in the streets after the riots, after the assassinations of Martin Luther King and Robert Kennedy. And so I taught public school for three years and those were hugely valuable years for me. I felt good about public service, but more important, I learned so much teaching children.
I had the sixth grade in Inner City Washington who were economically challenged for the most part and certainly challenged by all the other things, what it was like to be black in America and in Washington D.C. in the 60s. So I learned so much from them and so much from the other teachers with whom I worked. It was a great experience for me.
But then I did that. I agreed to do it for three years, I did it for three years, it was a wonderful experience and then I went to law school.
Daniel Linna: What a great experience. Well, I want to really shift gears here now for a second, because we have alluded to technology, we have talked about it a little bit and there is a lot of discussion about artificial intelligence. I think there is tremendous misunderstanding of what we are really talking about, these technology tools, and I think we are barely getting up to speed to where the technology was 20 years ago in the legal industry and we are not even really thinking about where the technology is going to go in the next 20 years.
Not everyone maybe would agree with that characterization of it, but tell me what do you see kind of, like what’s happening on the ground and how are the most forward-thinking firms preparing for where technology is going to go over the next 20 years?
Ralph Baxter: So I think fundamentally the most important — fundamentally, what the law firms are going to do most and soonest is get in control of their data. It’s going to be information technology and this is what Richard Susskind and Daniel Susskind talk about in their great new book about ‘The Future of the Professions’. So that’s going to be first and foremost.
So assembling, there is so much powerful data over which the law firms already preside that will enable them to serve the clients better, to price better, to manage their staffing better, everything they do, they can do better by getting in control of their data. The taxonomy of the data, the way it’s organized, the way it’s integrated, the way it’s presented, the way the partners and the other lawyers interface with the information, all of that, and I think that’s where the prominent action is going to be in the near term.
But artificial intelligence, meaning by that for me, it’s mainly machine learning and so deriving the power of the technology, using that to derive from what you have done to what you can do the next time and start with those documents already prepared and start with — get a head start on everything that you are doing in the legal service will be very important.
But the first step is getting control and making the most of your information, and including within that the analytics. I was on the Board of Lex Machina, one of those Boards, and Lex Machina, they — even when it was IP only, which now LexisNexis is much more, but it enables you to see what the likelihood of a given motion being granted is, to see how the judge in front of whom you are appearing behaves in the setting that you are going to present, to see how the law firm you are against, the client you are against, all of these issues that were obscure, that just were unknown to you, you now can know. It’s huge.
I am now on the Board of Intapp, which serves about 95% of the Am Law 200 with its information. I have learned so much from the people at Intapp about what is possible for the law firms if they will take the time and organize themselves and their thinking and their prioritization to assemble and deploy their data, learn from it, analyze it and serve the clients better and be more successful as law firms.
Daniel Linna: What do you think the clients are expecting law firms to be doing to serve them better today? I mean a lot of the change is being driven by Corporate Legal Operations Consortium, ACC, the groups that are starting to push law firms more and more. What do you think they really expect to see law firms doing today?
Ralph Baxter: Well, first and foremost, they expect the law firms to do a better job of managing their own affairs. So they expect the law firms to be thinking about their business models. They expect the law firms to be drawing on their information. They expect when the law firms are pricing a matter to be able to look back at what they have done in the past. They know how to look at their own data. Our clients know how to look at their data for the purposes of doing all the things that they do as they pursue their strategies, they expect the law firms to do that.
One of the things I have learned in the post-Orrick term, my post-Orrick years is that what the clients expect first and foremost is for the law firms to take care of their own businesses. That’s what I think. By the way, I think there is a lot of room for the corporate legal departments to push more on the law firms. They have the buying power, they can do more with it, and I think they should.
Daniel Linna: Well, can you give some examples of that? I mean one of the things that I see that blew my mind is Microsoft has been doing this forum now, where they invite some law firms in and I understand that some firms declined to show up. Now, maybe it’s because they thought they didn’t have anything to show, but I also think it might be that they thought we don’t have to do this dog and pony show and we will still be okay. I mean can you give specific examples maybe of what you think corporate legal departments could be doing or ought to be doing maybe to push the law firms a little more?
Ralph Baxter: And I can’t comment on Microsoft or any particular client, but I think the corporate legal departments should be much more focused on the business models of the law firms and should be telling the law firms, in addition to all the other things that we monitor, and they do monitor what it’s costing them. They do monitor the satisfaction of the — the internal satisfaction within the corporate legal department with the work of the law firm and other things, but they should tell the law firms, we are going to monitor your business model.
I think they should take a lead in expressing that they are concerned about how the law firm incurs cost, because that’s one of the drivers of the price being so high. And so tell the law firms that they expect them to put more attention to the models than they have been historically putting.
When the corporate legal departments told the law firms 15, 20 years ago, whenever it was, that we are going to focus more on what you do to make yourselves more diverse, it produced a direct and significant action by the law firms. It didn’t solve the problem, but more effort was put, more thinking was put to creating a more diverse and inclusive workforce. I think if the corporate legal departments said something analogous about the business models of law firms, they would accelerate progress.
Daniel Linna: I think a thread that would run through many of the issues we talked about is that we don’t have good measures for quality in the legal industry and we see that show up in a lot of places. We see it show up in this regulation discussion, because people are worried about what the quality of service is going to be now and then they have these anecdotes and say about different ways in which something may have been messed up. It relates to so many of these things that we are talking about.
Have you seen changes in the marketplace that would suggest to you, whether it’s consultants or academics or others that maybe we are making progress on try to figure out, because this relates to the machine learning question as well, because there are so many areas where we know that we do something as a lawyer, but we really don’t know what the outcome was, did it contribute to a victory or advancing the ball in any way, and if you can’t tie that kind of effort to what happened in the world, then it’s difficult to apply some of these technologies.
Ralph Baxter: So I believe it is increasingly common for corporate legal departments to be doing something in terms of monitoring results that amounts to what you are talking about, whether it’s actually quality metrics or not, they are measuring satisfaction, they are measuring success, and so there is progress and there is talk at CLOC and elsewhere about that.
And then of course there is Ron Dolan, who has spent now several years at Stanford, now at Harvard, studying quality metrics, pursuing a belief that he has and a well-founded belief from other experiences; this is a good example of a diverse workforce, from other experiences in technology, including at Google, that you can measure quality, even though a lot of the judgment about quality is subjective, you still can establish parameters that permit you in a way that is relatively objective to measure quality.
I think that’s a significant undertaking, because Ron is a significant person, a serious person, and he is backed by Harvard and dealing with law firms and major corporate law departments and I think something will come of that.
Daniel Linna: Yeah, yeah. Well, maybe we should have 10 other academics studying it as well.
Ralph Baxter: Right, right.
Daniel Linna: Yeah. You mentioned — we are coming close to the end of our time, but I just wanted to come back to one thing that you mentioned before. I loved your vision, where you were talking about that, some of these regulations we are talking about, I don’t think we set big enough goals for ourselves as an industry. When we have got 80% impoverished, who lack access to legal services, half the middle class, what is our moon shot, right, and why aren’t we talking about improving justice systems and improving rule of law, not only in our own country, but around the globe?
But how do you really see changes in regulation, improving legal practice? I mean I believe in what you say too across the marketplace, it’s why in some of the programs we have been working with, working with big law firms and things like that, and you see law firms working with legal clinics and things to improve delivery across the marketplace. But how do we kind of tie these things together to make sure that it’s contributing to improving access to legal services and improving rule of law but innovation and technology efforts as well?
Ralph Baxter: Well, I think that comes back to leadership. So I have had a conversation recently with some of the new leadership in the ABA and they see themselves as leaders, and they are. Judy Perry Martinez is a leader and they — ABA can be a force to lead the partners and the lawyers to do more.
This brings us back to a subject you asked about before, why isn’t there more political action on this front, and I think my answer effectively was there is not enough broad interest among the electorate in this subject. The people who know that this is a problem are the lawyers, they know, and those who are involved in delivering legal service to the consumers, like the Legal Services Corporation, they know what the problem is.
Lawyers have a responsibility in exchange for the privilege of being lawyers, especially now, to look after the interests of all who depend on law, and especially as you said, we believe in the rule of law. The rule of law is key to commerce, to a just society, and the lawyers know that we have this disgraceful situation on our hands of so many Americans not having real access to justice. So I think the responsibility falls to the lawyers and the leaders of lawyers to drive toward an outcome that does align all of the rest of these changes with addressing these critical public interest questions.
Daniel Linna: Well, it’s interesting to talk about the responsibility and do we take that seriously enough, are there enough people who really think that. I mean I have seen Jim Sandman speak many times. I was just in London, DLA Piper put on a Summit, Access to Justice and Technology and Jim asked, where is the outrage, where is the outrage?
And I think some of us are outraged by the current political situation in the US. Shouldn’t we be directing that same outrage to this situation? I mean if we want people to respect rule of law, when so many people in our country are so disconnected from the legal system, from lawyers, from address, why aren’t we addressing — turning some of our outrage there and solving this problem?
Ralph Baxter: You make a very important point. There should be outrage. I am reminded by your question of a time that I invited Jim Sandman to talk at the Law Firm Leaders Forum, and I also invited my wife and daughter to attend that luncheon where Jim was speaking, and I literally saw my daughter’s, and she was then a young adult working in New York City, I saw her jaw drop. She couldn’t believe what she was hearing from Jim about the number of people who were not able to access legal service at all. She had no way of knowing it.
I think of the great essay that David Wilkins, and Bill Lee and Ben Heineman wrote several years ago about the responsibility of lawyers to serve the best interests of society. And the book that Ben Heineman wrote about the responsibility of in-house counsel, to be the conscience of the corporations. We all have as lawyers the responsibility to see to it that the rule of law is a reality for everyone in the United States and to do the things that it takes, including making sacrifice in our economics, including expecting, by doing work pro bono and so on, including expecting all of our lawyers to be good citizens and to work for the rule of law and we should be much more upset, much more outraged by the current state of affairs. I think you are right.
So what’s the answer? You can’t make that happen. You can’t cause it to happen by edict. We are back to talking about leadership and inspiring our people to be the best they can be. And I do think it’s going to — it ends up falling to the legal community, whatever that turns out to be, if we broaden the community to include licensed lawyers and others, we will still expect them to do this — to rise to this responsibility in exchange for the right they have to deliver legal service.
Daniel Linna: Well, Ralph, I could talk with you for hours. I am just going to limit myself though to one last question. You talked about inspiring people, we talked about this, it is a problem that lots of bright students who want to make a difference in the world are no longer going to law school, and of course I am in a little bit of a conflicted position because I am now in a law school, so I try to make sure I am careful about how I counsel students about thinking it’s an important decision to go to law school. But yet, I want students to understand the kind of impact they can make in the world by going to law school and choosing this profession.
I mean what would you say I guess to someone who is thinking about going to law school and why they ought to maybe consider it and the future that you see for them in the law?
Ralph Baxter: Well, I think anyone considering going to law school should be realistic and make sure they are informed. I have four children, all of whom learned about law practice sitting around the dinner table in the Baxter household and only one of them chose to go to law school, but they should be informed, make sure it’s right for them.
But it is a very worthy career. It is a noble career. You are serving the public interest day in and day out, even when you are serving the interests of individual clients who have commercial interests that you are pursuing, no matter what it is. You are strengthening, you are acting out, you are enabling the rule of law in the United States or wherever you are as a lawyer and it’s rewarding. You are helping people achieve their objectives, solve their problems. You make their lives or their businesses better.
So it’s a wonderful career and at its best — especially when we play our cards right and make some of the changes that are right in front of us, which is what modernization is, to take advantage of processes and ideas and tools that are available to us in the 21st Century. If we do those things, it will be an ever more rewarding career. We once again will have lawyers and others in legal service looking forward to trying that case to the jury, cross-examining the witness, closing the deal of a lifetime because their special skills enabled it to happen.
It’s a wonderful career for those who are drawn to the kinds of work — the kinds of tasks that are included in law. I would encourage people to consider it. It isn’t for everybody, but I think it’s going to return to the characteristics and the rewards that caused you and me to choose to be lawyers when we did.
Daniel Linna: Right, right. Well, Ralph, thank you so much for joining us today and I am really excited to have you joining us on the podcast.
Ralph Baxter: Well Dan, I loved every minute of this and I too am excited to join you in this program.
Daniel Linna: Sounds great. Well, this has been another edition of the Law Technology Now Podcast on the Legal Talk Network. If you liked what you heard today, please rate us in Apple Podcasts. Join us next time for another edition of Law Technology Now.
I am Dan Linna, signing off.
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