Australia-based John Chisholm is a widely recognized strategic advisor to law firms on pricing and strategy – based on his decades of experience as managing partner for both law and accounting firms. A Fellow of the College of Law Practice Management and a Distinguished Fellow of the Centre for Legal Innovation, Chisholm recently assumed the role of Director of Innovim Group, in addition to his long term consulting work with John Chisholm Consulting.
In this interview with Asia Law Portal, Chisholm analyzes law firm pricing strategy, what law firms can learn from accounting firms, how lawyers can advance their careers, technological disruption of legal services, how much of a competitive threat NewLaw and the Big4 are to law firms, career options for law students, and opportunities for Australian law firms in the Asia-Pacific region.
Your prime focus as an advisor to law firms is pricing. You’re a strong advocate for firms to stop billing by the hour. Why do you take such a strong position on this issue and what do you recommend as alternatives to the billable hour?
I don’t just consult to law firms on pricing but also on positioning, strategy and structure. Pricing however has by far the greatest effect on any law firms profit and I guess, principally because of my view about the billable hour business model, pricing might be what I am currently most infamous for!!
My views on the billable hour model (and any retrospective billing model) are well known. I think it’s suboptimal, outdated, inaccurate, non-transparent and unethical. It is also demeaning to lawyers-especially good lawyers-that what they sell to clients is solely calculated by reference to time. Clients do not buy a lawyer’s time, so it is about time we stopped selling something our clients don’t buy.
The deleterious effects of the billable hour and its partner in crime, time recording, on our profession (for example on a firm’s culture, measuring and rewarding smart young lawyers by time billed rather than metrics that really matter, tempting otherwise ethical lawyers to do unethical things, damage done to client relationships especially though bill shock to name a few), are enormous-but the majority of the legal profession view these deleterious effects as simply collateral damage in the quest to making money from this flawed business model.
In short, I believe the legal profession should get rid of all forms of retrospective billing and do what the vast majority of the business world does- and what society expects- and that is price their services up front. Every lawyer and every law firm in the world could price their services up front-they just choose not to.
You’ve headed up both Australian law firms and an Australian accounting firm. What can law firms learn from accounting firms?
Interesting question. I believe each profession can learn- and is learning- so much from the other both in terms of what to do and what not to do. Each profession has their limitations and challenges of course but one of the best things lawyers can learn from the best accountants is that being a good business advisor is valued much more highly by clients than is a good technician. As we see more merging of the professions continue clients will be the beneficiaries of this.
You work not just with firms on innovation in pricing – but also with individual lawyers. How can lawyers on an individual basis improve their careers?
It would be a very easy answer to say just keep up with technological advances per se but being legaltech savvy is now only a table stake-it does not guarantee sustainable success or ongoing relevance for any lawyer.
I think the best lawyers are not only experts in some area (albeit a technical area of law or maybe an industry focus), but are far more outward looking and customer focused, they are curious and look outside the legal profession for “best of breed” and importantly they concentrate on increasing their clients profit before their own.
Beyond pricing, what are the most pressing issues law firms should address to improve their competitiveness?
I have mentioned some of those above but I also think generally as a profession we have to realise the world is changing and while for decades our profession was cocooned from many of the social, economic, and technological challenges (and opportunities) that many other industries faced, this is no longer the case.
Slowly but surely the barriers to entry, the monopoly so long enjoyed by the profession mainly through its law guilds, are crumbling. And so they should. In the end society and consumers of legal services will be better off as will good lawyers.
The cream always rises to the top when there is much stirring caused by greater competition. The best lawyers concentrate more on differentiating themselves from the competition and not trying to imitate the claims of their competitors nor be all things to all people. The specialist in any industry has the far wider geographical reach (no matter what their size), fewer competitors and commands the highest prices.
What are your recommendations to law students about how they might improve their career opportunities – given the significant changes that are taking place in the legal industry?
Understand that “law” as a profession is just part- and increasingly a lesser part-of the overall opportunities available to anyone who holds a law degree.
No doubt private practice is still, and, at least for the foreseeable future will be, a huge employer of, and attraction to, new graduates but there are so many other opportunities now for those willing to look outside the traditional. Even within the private profession itself there is an array of choices that not only were not there in “my day” but did not exist 10 or even 5 or 2 years ago-let alone what will be the case in the next 2,5 10 years.
As the barriers to entry continue to erode, technological advances and client needs evolve and the professions continue to fuse, even terminologies like Biglaw and Newlaw will lose their “historical” meanings and significance. Of course, the career paths in house and in corporate become more exciting and important every year.
When you add to this all the opportunities opening in the legaltech space, law per se has never been more stimulating for smart business & tech savvy lawtrepreneurs. But the skills of yesteryear will not be the skills of today or tomorrow. A confession. I am much more innovative and less risk averse now I no longer run a law firm.
Are NewLaw and the Big4 genuine competitive threats to traditional law firms?
Of course they are even if traditional firms refuse to recognise the threat. The “full on” assault I agree is more hype than real, but I like to think it is the guerrilla skirmishes that will eventually take its toll on Biglaw. Not today or tomorrow but sometime within the next decade.
These threats from Newlaw, Big4 and many other disruptors is forcing some traditional law firms to change their business model which is fantastic. Sadly, though many firms cannot and will not change soon enough or substantially enough and eventually they will wither on the vine.
Again, sadly what keeps many of these traditional Biglaw firms alive is the fact that most of their clients are themselves lawyers and lawyers buying and selling form each other is not always a good recipe for real innovation and change.
You’ve recently started up the Innovim Group. What are your core services and what are your goals for the future?
For well over a decade now as mentioned previously I have been a huge proponent of lawyers, making a complete paradigm shift away from the “we sell time” business model. My business partners in The Innovim Group, David Wells and Liz Harris, were originally clients of mine, shared the same views as me on the need for genuine transformation in the profession and we became close friends. David and Liz are still both practicing lawyers (I am a recovering lawyer).
David is still managing principal of Moores, one of the few and first law firms in the world that completely changed their business model to a “timeless” environment, and Liz is Australia’s top legal costs consultant who came to the realisation that while her own business model was principally built around lawyer fee complaints, such complaints could be largely eradicated if lawyers priced their services up front instead of billing in arrears.
In short Liz set about disrupting her own business model and as I often joke with her using her knowledge and skills for the forces of good rather than for the forces of evil! I would often ask both to help me out in pricing and firm of the future programs I would run because of their hands-on practical experiences.
In late 2017 the 3 of us decided we would have more impact better penetration and more fun if we were to join forces and better utilize use our different skill sets. Essentially, we work with professional firms to transform their pricing to capture the value they create for their clients, and through this create long term trusted relationships, which deliver profits to both the firm and the client. We are working with lawyers not just in Australia but in New Zealand, Singapore, USA, Canada, South America and the UK. We are loving it.
How can Australian law firms leverage their unique position in the Asia-Pacific region and the growth in trade and investment between Australia and other APAC region economies?
Perhaps I might suggest that is not just Australian law firms that can and are leveraging their unique position but moreover Australian lawyers and other professionals that are involved in the legal profession.
By this I mean-and here I am showing my Aussie bias-many Australian organisations have taken a leading role in the legal tech and innovation space not just in Australia but increasingly internationally.
Maybe it is because our market is so small that for many to be financially successful, they need open themselves up to international markets or maybe it’s simply because we live on an island nation a fair way from the closest continent, so Aussies are used to international travel. Obviously, we are part Asia (even if for a long time we pretended we were not) and Australians are used to both travelling to and trading with, our Asian neighbours.
The legal profession is no exception. Lawyers tend to follow their clients geographically, so no surprises inbound and outbound legal “investment” is thriving.