Non-lawyers grow more powerful in Texas law firms

Texas law firms are increasingly turning over some of their most strategic decisions to non-lawyer professionals in a seismic and, some argue, long overdue shift.

For two centuries, law firm partners across the country decided which lawyers to recruit, hire and fire; which practice groups to expand, shrink or even eliminate; and which clients to represent and how much to charge for legal services.

But since the 2008 recession, law firms have seen dramatic shifts in the demand for legal services. Driven by technology and cost-conscious clients, firms have had to change their approaches to hiring and developing lawyers and serving and billing clients, as well as finding or retaining a more demanding clientele.

Over the past five years or so, nearly every major law firm operating in Texas - including Houston-based firms Baker Botts, Bracewell, Norton Rose Fulbright and Vinson & Elkins - has hired non-lawyer professionals to handle key marketing and staff development operations, according to interviews with law firm leaders by The Texas Lawbook.

Their titles include chief talent officer, director of practice management, chief pricing strategist, director of business development and chief value officer. They are more likely to have MBAs than law degrees. And their compensation often reaches the mid-six digits.

Their mission is simple: boost revenues and increase profits.

When Baker Botts brought in Gillian Ward as chief marketing officer in 2014, the firm didn't have a research function. She has since built a robust one. The firm also didn't have a pricing strategist, so it hired John Strange away from V&E. Last fall, the firm even considered hiring a competitive intelligence manager but put those plans on hold when it brought in business development director Clara Rodriguez.

"The days of going to lunch and coming back to three messages and new cases sitting on your desk are over," Ward said.

Lawyers now get development training from the time they join the firm to the time they make partner, she added. Client interviews are monitored by Ward and her team.

Legal industry experts say hires like this are part of a decades-old movement to operate corporate law firms more like businesses. Critics claim commoditization of legal services marks the end of law as a noble profession, putting firm revenue ahead of clients.

But firms are finding that even their corporate clients are driving change. Competition from non-law firm providers, nontraditional firms driven by technology and in-house legal departments are permanently changing the legal profession into a legal industry. Moreover, there is stiffening competition for outside legal spending, which remains relatively flat.

According to BTI Consulting, spending for legal services in 2012 was $99.8 billion, $60.5 billion of which went to outside counsel. Although a record $102.3 billion was spent on legal services in 2016, outside legal spending fell to $60.3 billion.

A national survey by legal consultants Altman Weil underscored the lingering sense of anxiety. Only 38 percent of law firm leaders said demand for legal services had returned to pre-2008 levels. And 62 percent think that erosion is a part of a permanent trend.

Nearly 70 percent say they've lost business to in-sourcing by corporate legal departments, and 85 percent see the replacement of human legal resources by technology as a legitimate threat.

William Cobb, a law firm consultant in Houston, said the trend is the result of law firms feeling pressures from their own partners to increase revenues and profits. He said non-lawyer professionals are making Texas law firms more competitive in staff development, research and fee structure and pricing.

"Lawyers have figured out they're not good at those things," he said.

Four out of five of the top U.S. law firms have employed pricing specialists for a few years. What's new is combining pricing with legal project management, said Toby Brown, who led pricing at Akin Gump Strauss Hauer & Feld in Houston before he left in 2016 to be the chief practice management officer at Perkins Coie in Seattle.

"It's not just pricing anymore," he said. "It's how you engage with your client to provide service in more innovative ways."

John Strange was Baker Botts' first director of pricing and project management, which changed its name to practice management in January. The marching orders were simple: use practice management tools to boost revenue.

Strange said his team gets involved "from the get-go" during the firm's strategic planning process, when department chairs determine what the priorities are in terms of financial performance and potential client targets and lateral hires. The team creates various goals and pricing scenarios that are taken to the client. If one is approved, the team tracks its performance against the plan and shares alerts with those involved.

It wasn't easy at first.

"But as people had exposure to what my team can contribute, they began to lean on us," he said. "They want to know how their matter is performing, how their practice is performing, how they should practice a matter and who should they hire."

Baker Botts increased revenue almost 10 percent and profits increased more than 15 percent in 2014 and again in 2015. His team now has eight members, including a new pricing analyst.