THE ORRICK YEARS Ralph served as Chairman & CEO of Orrick for nearly a quarter century, leading the firm...
Disclaimer: This episode was originally aired on Dec 11, 2018.
The International Legal Technology Association’s annual conference came and went this past week, so we were unable to record a podcast. But we have a treat from the archives — a conversation with Intapp board member and all-around law firm business expert Ralph Baxter about what the future holds for law firms.
Above the Law – Thinking Like a Lawyer
From the Archives The Future of the Law Firm (Rebroadcast)
Joe Patrice: Hello, welcome to another edition of Thinking Like a Lawyer. I am of course Joe Patrice from Above the Law. And today, I am actually at the International Legal Technology Association Annual Conference which means I’m not available to be recording a new edition of this podcast. But fear not we have an archival episode that talks about some of the very issues that I’m learning about here at this conference, and so we thought we would cue that up for you so enjoy this archival edition of Thinking Like a Lawyer.
Intro: Welcome to Thinking Like a Lawyer with your hosts Ellie Mystal and Joe Patrice talking about legal news and pop culture, all while thinking like a lawyer here on Legal Talk Network.
Joe Patrice: Hello, welcome to another edition of Thinking Like a Lawyer. I am of course Joe Patrice from Above the Law. With me, as always, Elie Mystal.
Elie Mystal: What an excellent cold-open there, Joseph Patrice.
Joe Patrice: You know I did, I’ve been doing this for much longer than I think most of our readers would like, so.
Elie Mystal: Well, you’re very old.
Joe Patrice: Yeah, right, exactly. And yet I’m not the one with a head full of gray hair like you over here.
Elie Mystal: How you been?
Joe Patrice: I’ve been good. What’s up with you?
Elie Mystal: Liberals are bothering me this week.
Joe Patrice: I mean, okay. Now, I think we need to clarify there’s multiple definitions of that potential term, so like your view of it is more, your concern is obviously more with people who are already left to center as you are but who are not as left to center as you.
Elie Mystal: Who are not sufficiently pure.
Joe Patrice: Yeah, right.
Elie Mystal: And not sufficiently I think ready for what comes next, right? I think everybody had this big kind of like oh, blue wave, right, and then it was actually — there was actually a wave. I mean, gerrymandering makes that hard to see, but I mean Democrats won significant gains in the house.
Joe Patrice: Something like 8.3%, yeah.
Elie Mystal: You are right, didn’t take back the Senate. Trump is still the president. He is still going to be the president because you’re not going to have 67 votes to impeach him.
Joe Patrice: Right.
Elie Mystal: And so now it’s like kind of what are we going to do next and so often you hear liberals kind of talk about how they’re trying to get back to norms and get back to the way things were and it’s not going to be that, right, like we’re not going back.
So, one of our favorite — because he is a professor but one of our favorite podcasters really is Mike Duncan. He did the History of Rome series, he currently is doing a series called Revolutions, and he has a book out called the ‘Storm Before the Storm’. This book is basically about the generation before Caesar — the generation that killed the Roman Republic before Caesar killed the Roman Republic.
Joe Patrice: Sure.
Elie Mystal: And like the main takeaway of his book is that once the norms break down, right, once the political and social norms go away, they don’t come back. The next generation builds on that norm breaking and breaks all brand-new norms.
Joe Patrice: Sure.
Elie Mystal: You can’t reverse times arrow on this stuff. And I don’t think liberals sufficiently understand that that is the stage of history that we are living in.
Joe Patrice: Right. So, your position is that they should be more ready to just push forward into Caligula.
Elie Mystal: I’m trying to get us ready so that when Caligula shows up he’s on our side as opposed to the other guy’s side.
Joe Patrice: That sounds terrible and so good.
Elie Mystal: Well, this is my disagreement with you. And you’re big on this asymmetrical war, right?
Joe Patrice: Oh yeah.
Elie Mystal: Liberals can’t burn it down because that just helps the Conservatives and I understand that argument that’s not bad — it’s not as bad as some of your other ones but —
Joe Patrice: Yeah, I mean, it is not as great an argument as all the other ones that be yours, yes.
Elie Mystal: But at some fundamental level, I think liberals need to understand and to be prepared to do what is necessary now to roll back. The things that we need to roll back from Trump are not Trump’s norm-breaking, we need to start rolling back the actual damage he is causing to people.
Joe Patrice: Right.
Elie Mystal: And the only way we’re going to do that is by getting down the dirt and fighting and playing some hardball.
Joe Patrice: I have no idea how any of that makes any sense. Like I don’t know what that seems like empty, I don’t know what that means like what is this hard volley thing. Like there’s no —
Elie Mystal: That’s the court.
Joe Patrice: Okay, I mean, all right, that’s fine. I mean, that’s not really a norm-breaking thing really in a lot of senses. I mean, it’s controlled by a Judiciary Act, that’s a statute, it’s not like a changing constitutional norms in any way. I know, if you have votes for it then you can do that.
Elie Mystal: See this is why we disagree though because see, when I say breaking norms, you do that kind of thing. You are like, oh, that’s not a norm.
Joe Patrice: I mean, things like norms, yeah.
Elie Mystal: That’s not a norm. This is like you’re already so left of me that the things that most people think that we’re radical about, I just say them in a radical way, you say the same radical crap but you say, it’s like, oh, that’s clearly normal for us to have 15 justices if we want to.
Joe Patrice: Yeah, sure, I mean, the world’s grown. Anyway, fair enough. So that seems I don’t really know that I was trying to come up with a good like logical transition into our break from like I was hoping you’d say something like we need a wakeup call and I’d say something like, oh, you know what to do if you’re getting wake-up calls which is —
Elie Mystal: You could just tell me to say that and then we could just do it that way.
Joe Patrice: Yeah, I mean, but it’s so much nicer and like it’s more of a test of skill to like see if I could hit it when you said something.
Elie Mystal: I don’t know what the next read is.
Joe Patrice: Anyway. So I’m just going to — so yeah, let’s do a wake-up call, he needs wake-up calls that, if you’re getting wake-up calls then if you’re missing those calls, if you’re spread too thin, interruptions kill your productivity but clients demand a quick response.
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Elie Mystal: If I was going to do it, I would have gone with, do you feel like butter spread over too much bread?
Joe Patrice: Yeah, see, like a bedspread thing, there were so many like I just seen it. Anyway, whatever, let’s get on with our actual conversation of the day where we’re going to talk about the future kind of the legal landscape and how to deliver legal services going forward.
Our guest today is Ralph Baxter, he is the former head of Orrick and now he’s a Board member of Intapp.
So, welcome to the show.
Ralph Baxter: I’m delighted to be here and listen to that fascinating conversation you have about the future of politics in America.
Joe Patrice: Well, yeah, because you — let’s start there, so you actually have run for Congress.
Ralph Baxter: I have.
Joe Patrice: So, what was that experience like, because I think I speak for most people who have never run for Congress that it seems like that would be a whole to do?
Ralph Baxter: Well, it is a whole to do and it was fundamentally a very rewarding experience. I loved every minute of it. I even enjoyed the fundraising part because the way we did it was to reach out to people one by one and engage with people about what matters and why I was running and appealed to them to support the campaign, not just write a check, we needed checks to be written but to support the ideas we were pursuing.
So, I loved it, I loved the part in which I got to really get together with people in West Virginia and people’s living rooms and homes and talk about the issues that confront our State of West Virginia, but the outcome was disappointing, but I’m glad I did it. I’ll never regret doing it.
Joe Patrice: Yeah. Are you thinking about ever doing it again?
Ralph Baxter: No.
Joe Patrice: No, fair enough.
Ralph Baxter: Not because I didn’t enjoy it, not for any reason of any negative reaction to doing it, but my family and I had decided that we would regard this as a single-elimination tournament.
Joe Patrice: Fair enough.
Ralph Baxter: I lost in the first round and that is that. So I will continue to be active in advocating positions and supporting other candidates and so on, but I won’t be a candidate myself.
Elie Mystal: Mr. Baxter, I’m so happy to have you on the show and for people who don’t know all of your back story, I can’t get into your full résumé here, but if you don’t know who Ralph Baxter is, he is one of the big thinkers in the legal profession.
He is one of the — one of those people who has a vision of where this is — not just where this is all going, but really like, how this all fits together? He’s not the kind of lawyer who just — who — managing partner, who’s just kind of living from paycheck to paycheck, if you will.
So, Mr. Baxter, one of my first questions that I am happy to have you on, we happened to be in bonus season, at 30,000 feet when I tried to explain bonus season especially to non-lawyers especially — or even to lawyers who just don’t happen to work in Big Law, one of the things that I always struggle to explain to them is why bonus season is essentially a collusive enterprise among about a hundred firms? Why do all of these firms follow each other in lockstep when it comes to their bonus payments?
Do you have any insight on that, like do you have a sense as to why this market, and again, I’m using collusion in the colloquial sense, obviously, these are lawyers, they know exactly how not to collude.
Joe Patrice: Right, yes.
Elie Mystal: But do you have a sense of how this industry has gotten to this point where a hundred or so firms are going to be lockstep in their payment for talent?
Ralph Baxter: Well, that question — the answer to that question would take us a lot longer than we have. And it starts with everything from the way lawyers are trained, the psychology of lawyers that causes people to choose to be lawyers to begin with them, those things really are at work in this kind of a question.
But, I think fundamentally in the modern contemporary sense, this is about the war for talent and the challenge that law firms believe they are facing at attracting and retaining people who are up to doing the work and serving the clients and so on that are involved in the law firms and they worry that if they fall behind what they perceive to be the market that they will somehow materially undermine their ability to attract and retain the lawyers they need.
And I think what’s really important about this is that it’s an element of the law firm business model needing fundamental overhaul and this part relates to the financial model of the law firms, the incentive systems of the law firms, which need, well, fundamental change.
Joe Patrice: So that’s a good transition point to talk about what you do now. So you are in this unique position of having been a top global big law firm and now you’re working with Intapp, and so, before we get too far down the road, Intapp has kind of a broad portfolio but it’s kind of does consulting services, there’s a platform that uses some cutting edge technology. So, it’s although about what you were just saying about helping firms get their model right, so can you give us a quick summary of what Intapp does?
Ralph Baxter: Sure, and let me just back up. I am on the Board of Directors of Intapp and Intapp and I found each other because of what each of us is doing. Since I left Orrick except for my excursion into politics, I’ve been dedicating my time to modernizing the way legal service is delivered, that motivated me when I was running Orrick and it motivates me today.
And as you say, I’ve got a different perspective on it now working from the outside. So, I’m engaged in a lot of different things. I’m very active at Stanford Law School with the Center for the Legal Profession and CodeX, the Center for Law and Informatics at Stanford, and I work with the Harvard Center for the Legal Profession.
I’m doing a number of things and one of which — and one of which is very important to me is Intapp. Intapp is a data technology, information technology company. It serves law firms predominantly, it has over 95% of the Am Law 200 are customers of Intapp. So it’s got as broad and an involvement with large law firms of the United States and beyond the United States as well as anyone.
And it is doing just what you said, it is helping law firms modernize. It started by helping them organize and integrate their data and then progressively over time, the company is about 17 years old has positioned itself to have a platform that helps law firms access, organize, analyze, all of their data and law firms have enormous databases, all of their data so that they can serve clients and build their law firm businesses better by distilling the learning from their data to do all of that in a much more effective way.
Joe Patrice: It seems like we kind of joke around here a lot that lawyers with some notable exceptions obviously, mostly like the people like us all on this conversation, but lawyers generally speaking have not been the most tech-savvy, not been the most open to letting technology show them what to do, but that kind of old school world is becoming one of those things where competition is pushing that out.
It seems like the more-and-more I dig into this sort of thing, the more-and-more like you said, about how there’s data everywhere. I think big law firms are coming around to the realization that there is data everywhere and that data can help you do things like figure out how to realize bills faster or figure out how to price things out better, is this the sort of point where and maybe this is in a lot of ways what Intapp really brings to the table, is it reaching a point where maybe in some of these law firms, we’ve historically let them be run by lawyers, it’s a partnership and lawyer in-charge, is it increasingly getting the point where maybe some of these tasks need to be — there needs to be a letting go and realizing that maybe as lawyers what we’re good at is law and not necessarily the best at figuring out what we need to do to run this as a business and maybe that’s a role for either outsider managers to be involved or for consultant groups to be involved.
I guess I’m kind of all over, but do you feel like that’s a sort of place where lawyers are having a real hard time letting go?
Ralph Baxter: Well, lawyers have had a hard time letting go as long as I have been a lawyer. I lived through. I’ve been a lawyer for 44 years and so during my time we went from lawyers doing pretty much everything to professionalizing progressively the management of law firms and in the early days the law firms had a very hard time really letting go of responsibility to professionals who weren’t themselves licensed to practice law.
And I think we’re past that in Big Law, certainly, but I do think law firms need to continue to professionalize, to assign responsibility for different elements of managing the firm and actually different elements of delivering legal service to the people who are best positioned to do it. And your question like the earlier question you asked goes to a lot of different things.
Within the practice of law there are lots of tasks and activities that themselves are not the practice of law, fundamental fact gathering, due diligence and other fact gathering itself is not the practice of law and elements of like fact gathering can be done by people from diverse backgrounds. In fact, depending on what the subject matter is often somebody would be better positioned to do that by virtue of training and engineering or some kind of science than training in law.
So, I do think firms need to do that, but I don’t think that’s a fundamental problem. I think the fundamental challenge for law firms is taking stock of why the market is as restless as it is? Why it seems so clearly to be searching for a different kind of service, a different value proposition than the one it is getting from most of the law firms, and then adapting to the answer to that question?
Now the reality is, lawyers are really outstanding at what they do, and certainly the lawyers in the most successful firms are really outstanding at what they do, what they set out to do and 17:30 their careers as great trial lawyers, great deal lawyers, they do great. Probably that’s not the problem, and the problem isn’t that they don’t know how to make some money because the lawyers continue to be highly compensated.
The problem is that the service is not being delivered to the clients and if we just focus for the moment on the corporate clients in the way the corporate clients wanted, it’s not as responsive to their actual business objectives as they want it to be, it takes more time than they wanted to take, it’s less transparent than they want it to be and it costs more than they want to pay, and more than they think they should pay. And that problem is exacerbated because pretty much everybody knows it could be done better. Modern tools, technology and process design and of those two process design I think is the more important, enable us to deliver legal service in a way that is more in keeping with what the clients really want.
And the challenge for law firms is to take stock of that, be realistic about that and figure out how they adapt their models so they can respond to what the market really wants better.
Elie Mystal: Given that disconnect that you bring up between the services provided and the services demanded, do you think that the legal economy is stable. You have the unique perspective of having kind of lived through one of these, the last big legal market recession, contraction whatever you want to call it in the mid-2000s, certainly whenever I see and Joe is with me on this, whenever you start to see all of the salary raises and all of the lockstep bonuses and whatever, you know that what’s happening is that the firms that are healthy are putting a lot of pressure on the firms that are unhealthy, on the firms that that can’t keep up.
Ralph Baxter: Right.
Elie Mystal: Certainly right now the economy is going great, but that’s not going to last forever. Like, do you think that the kind of the fundamentals of the legal economy or strong or do you think we’re just kind of a couple years away from another big kind of a layoff hit?
Ralph Baxter: I don’t know what the layoff hit. I don’t think — so first of all I think the fundamentals are strong. The demand for legal services has never been greater, never, and the demand for legal service is growing. What’s happening and what your question really goes to what’s happening is that less and less of the overall market demand for legal services.
Demand defined as the need for it, the interest and the desire for it. Less and less of that demand is going to the largest law firms, more and more is going somewhere else. That’s why there’s this increasingly intense competition among the firms for the remaining work because more of it is going in house, going to alternative providers, a lot of it around the world is going to the big four as they get bigger and bigger in law, and that’s the setting, but the business of law, the profession of law is as important as any profession in the world.
Law drives global commerce, it drives local commerce. It enables, adjusts society and there’s more and more law and the data that makes complying with the law more and more complicated.
So, it’s a great profession to be in, in a sense that it’s — you are serving noble causes. It’s a great business to be in, in a sense that there will be a demand for the services and you can make a great living and have a rewarding career. But, Big Law is going to undergo significant change in the years ahead, and I have a sense that we’re on the brink of rapidly accelerating change.
One thing to notice this, when you read the financial reports of how law firms do every year in the American Lawyer and Above the Law and elsewhere, the averages as reported continue to go up and I’m actually surprised every year that they do, but they do, but within that when you look at the performance of the individual firms, the individual participants and if you have the data, if you could look within that at practices and offices and other sub-parts of law firms, it’s not the same kind of uniform story and not everything is going up and not everything is going up at the same pace even among those that are going up, and in the data that’s beneath the surface you can see the impact of these pressures in the marketplace and I think in the time ahead — I think that there will be more losers. There’s going to be winners and losers. There’s going to be more people struggling, more firm struggling, more practice groups struggling and there’s going to be some volatility within the marketplace.
Joe Patrice: I feel like real estate lawyers all across the land, just took out their lighters put them up in the air for that one. Look, I can’t let you get out of here without talking a little bit about outsourcing versus in-sourcing. Again, I think you’ve been kind of a visionary on this in terms of encouraging or showing a way in which law firms can in-source some of their lower level legal work instead of two very expensive first or second-year associates, you don’t want to be doing that work anyway as a former first or second-year associate. I can attest to that.
Ralph Baxter: Right.
Joe Patrice: To in-source that work to contract attorneys and people — some with law degrees, maybe some not with the most expensive law degrees in places, in markets that are not as expensive to live in and I also think that the importance of that that you saw was that if the firms aren’t in-sourcing it and those jobs aren’t going to kind of American-trained lawyers then eventually the firms are going to outsource it and we know that, right now we know that legal markets outside of the US are eating a lot of that kind of low-level yet still critically important man-hours and they’re providing that work for clients — quality work for clients at a discounted rate.
So, can you talk a little bit more about just in-sourcing versus outsourcing and as a law student who — let’s say for a second we’re not talking about the law students who are going to Harvard and Yale and try to be Supreme Court justices, for a person just kind of thinking about getting a quality State school law degree what that means for them kind of in the Big Law market?
Ralph Baxter: Well, that’s a handful. I do think that in-sourcing is a great idea and what we did at Orrick was create a Center in Wheeling, West Virginia, which as you said it — as you suggested it’s a lower cost community. Cost of living there is lower and it was more cost-effective to do the work there. Lots of people who want to live in Wheeling and that area of West Virginia, Ohio, Pennsylvania, they come together right there and it made all the sense in the world and on any given day or it’s got a 150 lawyers in its office there in Wheeling, West Virginia. But, that’s just one way that you might address this question.
The real issue for the law firms is how best to do the work that needs to be done to serve the clients, and so, is the answer to do it entirely with people who start at over $200,000 a year in compensation sitting in buildings with the highest rents in the world or is it — are there better ways to do it?
And the answer of course is there are better ways to do it and to disaggregate the work, assign work to people who are optimal to do that work. And you’ve touched on something that’s really important, not everyone’s going to be interested in doing all the different kinds of work that a law firm needs to do to serve its clients. It’s not just a matter of what’s the right cost profile, it’s also a matter of matching the work to the interests of the individuals and matching work to the talents of the individuals, and the traditional law firm is regimented in a model that was created no later after the Second World War, and we need to be more creative and be like our clients are and more thoughtful about what might be.
And so the in-sourcing was one change that Orrick made and it’s been wildly successful for everybody but there are lots of other changes that can be made if we just open our minds and think about how might we do this best, what resources do we need to have? For example, what resources do we need to have?
Is it sufficient to have on track to partner associates and partners and that’s — those are the only humans who can do the work or could we diversify the workforce, diversify the content of different positions, the career paths of different people and do a better job, and the answer of course is, we can, and we can populate our law firms with lawyers who are who don’t choose.
Just as you suggested not everybody wants to be a partner in a big law firm, no matter where they went to law school. So we could populate our law firm with lawyers, some of whom want to be partners, some of whom are partners, others who want a reliable long-term position, practicing law in a positive environment, doing rewarding work but who don’t aspire to do all of the things that partners are expected to do, and that’s what Orrick has done.
Orrick doesn’t have contract lawyers, it has career associates and there is a career there and you can be there for your entire career, but it’s a different path and the responsibilities are different than if you want a role as an associate on track to be a partner.
And why wouldn’t we have others in our workforce who are intelligent, hard-working, trustworthy professionals who are not licensed to practice law but who can do the elements of our work that is not itself the practice of law, why wouldn’t we diversify our workforce that way, and why wouldn’t we use technology to do the parts that it can do?
Machine Learning with each passing day can do more of the routine work at very work that first year, second year lawyers don’t want to do, clients don’t want to pay first and second year lawyers to do can be done by the technology, why wouldn’t we do that? Why wouldn’t we have partnerships with others who’ve organized businesses in a different way to be able to do parts of the work in a way that is effectively an outsourcing or a partnering with us, when they can do it more effectively than we can? Why wouldn’t we make that part of our resource model? And that’s the kind of thinking that the law firms need to do.
Joe Patrice: Great. Well, thank you so much for joining us. Thank you everyone for listening. If you aren’t subscribed to the show, you should. You should give us reviews, you should follow us on — at Above the Law, you should follow @ElieNYC and @JosephPatrice on Twitter.
Above the Law now has an Instagram account, you can do that too, I mean —
Elie Mystal: We have a what?
Joe Patrice: Instagram, yeah, we’re like moving slowly into the 21st Century. So, yes, do all those things, listen to the Legal Talk Network shows.
Elie Mystal: What do you put up like pictures of briefs?
Joe Patrice: There’s some good stuff that’s been put up there. We’ve got people working on it, our top-top people working on this.
Anyway, so with that, thank you so much and thanks to Smith.ai and we will talk to you again soon.
Elie Mystal: I’m the Executive Editor that didn’t know we had an Instagram account.
Joe Patrice: Fair enough.
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