You won’t find large office space, power suits, or even lawyers inside the Penn. Ave.-based bureau of the law firm Clearspire. Confused? Not President and CEO Bryce Arrowood, he is confident. According to Arrowood, Clearspire represents the pinnacle of a changing market for legal services.
Clearspire aims to “change the system,” with a new approach to client billing and legal services. At a typical firm, according to Clearspire, partner profits comprise over 30 percent of typical big law balance sheets. Office overhead accounts for another third. Only the final tranche of revenue—one-third of the billable rate—is earmarked for those attorneys’ salaries diligent and dedicated to client work product. Since October, Clearspire has worked to channel more firm profits into direct value for the client.
To accomplish this, Clearspire has a 1:2 ratio of lawyers to business managers—fodder for reflection on how much information technology and business administration, as opposed to actual lawyering, plays into the smooth operation of a law firm. For those few Of Counsel at Clearspire, there is no dress code or FLEX schedule request forms. Most attorneys already work from home via high-tech software with virtual meeting rooms and virtual representations of each employee. The Washington Post, first to profile the firm, reports:
“One of the first things new hires do on the job is pose for three photos that become their online avatars—one on the phone, one too busy to be interrupted and one available—which allow their colleagues to begin conversations only when appropriate.”
Clearspire is not off track. Dan DiLuccio, a Principal at Altman Weil, is quoted as saying, “The current economic environment may be the tipping point that causes general counsel to finally demand real financial accountability from their law firms or start moving to firms that are more flexible.”
But Clearspire has chosen an extreme response. In the same way the e-book industry is slow to gain market share, the total digitalization and outsourcing of legal services is perhaps too much, too soon. Although Kindle and Nook sales are high, the general population has shown its preference for the feel of a new hard-backed book. Similarly, individuals filing for divorce or corporations facing high-stakes mergers, though dissatisfied with the current cost-to-efficiency ratio, would not attend a meeting with a lawyer in jeans. Or, for that matter, the avatar of a lawyer in jeans.
By founding Clearspire, Arrowood is trying to respond to clients’ growing frustration with high fees in the legal industry, especially for those lower-level employees. “These people are being billed at $400 at least per hour. And the clients are saying, ‘Why am I paying to train this guy?’”
Nevertheless, Clearspire seems predominantly focused on blue-collar lawyering. If firms only reward middle-level legions, who is left to train the first-years? And, what motivation would they then have to earn promotions to partner level—especially when there’s no partnership at all?
There are, of course, many positive aspects of Clearspire’s practice. For example, the idea that law firms, like any business, need administrators. Too many firms skimp on human resources, or consider themselves too boutique to follow a strict and proper budget. A lawyer is only as good as his paralegal. In the same way, a law firm is only as good as its structure. Administrators are the ones who contribute fresh ideas regarding bonuses, employee incentives, and bureaucracy that both attract new employees and retain the old.
Also, Clearspire’s clear priority on information technology systems, is, in fact, critical to success. If your firm’s budget is pressed for funds in today’s economy, it’s important not to skimp on computers, electronic discovery software, or case management programs. Law firms should embrace the technology revolution, or face a fate similar to Howrey’s, which failed because of its inability to evolve.
Finally, Clearspire is committed to flexibility on the part of its offices and employee schedules. Efficiency is achieved differently by different people. So ask your employees what motivates them, and implement changes accordingly. Remember, a system of monetary incentives does not make the best policy.
A step in the right direction doesn’t have to be a giant leap forward. Gradual but substantive changes will demonstrate to clients that your firm is committed to serving them capably and consistently in this new generation of law.