In this week's Law Firm Disrupted, we look back on a week of discussion about measuring performance in the legal market.

I'm Roy Strom, the author of this weekly briefing on the changing legal market, and you can reach me here or sign up to receive this newsletter here.

What a 'Performance.' Legalweek 2019

It was cold in Chicago this week, just in case you haven't heard. Just kidding. Everyone heard about it.

Anyway, I wasn't here for the worst of it because I was in New York for most of the week at ALM's annual Legalweek New York conference, where hundreds of lawyers, law firm managers, vendors and people like me go to talk about law firms and the legal services market.

Maybe I poisoned the well, but if there was one theme that I heard mentioned most, it could be summed up in one word: Performance. As in, how well are firms performing in their task of delivering legal services?

This may be unfair to the practicing lawyer, but most people I spoke with seem to agree that law firms are not really measured on the performance of their legal work. Most clients don't have a way to measure the outcomes of the matters law firms handle on their behalf. But that might be changing.

One of the most interesting developments I heard about along those lines came from a discussion with Mark Smolik (pictured above, second from left), general counsel and chief compliance officer at DHL Supply Chain Americas. Smolik is a board member at Qualmet Legal, a young company that is helping clients measure the performance of their law firms.

The concept is rather straightforward, Smolik says. It is based on the idea that every employee's performance gets reviewed by their employer. And yet, companies are not reviewing the performance of outside law firms that they pay millions of dollars a year. Smolik says he has been doing this with his own law firms for quite some time. But Qualmet's goal is to roll that out to the broader industry.

“When I rolled this out, I might as well have been the pink elephant in the room,” Smolik said. “The law firms were like, 'No way in hell.' But what has happened is the law firms that are with me have shown performance increases that are so meaningful that it leads to significant growth in their revenue and significant increases in their performance.”

More and more, I am hearing that performance metrics are crucial to bringing about a more efficient law firm market. And “efficient” is a word that you can typically use to define the desired outcome of “innovation,” which we also heard a lot about at Legalweek.

On the efficiency front, Trevor Faure, CEO of Smarter Law Solutions and a former general counsel of EY, said changing the legal services delivery model can boil down to one word: Process.

“Process is 99 percent of innovation,” Faure said at a Legalweek panel. “Define what you do. Measure how you do it. And improve what you do.”

He went on to say that this type of analysis can help law firms win more business. And that should come as no surprise.

“The law firms who win convergence programs are getting rich,” Faure said. “But what that requires is the cold, neutral objective analysis of what you do, what the client wants, and how you can most effectively and efficiently improve that.”

I'm sure that is a topic we will hear more about as 2019 progresses. The legal market is warming up to the idea of measuring performance.

Roy's Reading Corner

On LegalWeek: The team at The American Lawyer wrote a couple of stories about some of the discussions I referenced above, which were part of panel discussions at LegalWeek. One tackles the question of whether clients should do more to force law firms to change. The other asks whether law firm partners will tune out the topic of “change” if they continue to see benefits from the traditional model. You can catch up on more Legalweek news at this special section of Law.com.

On Performance: We've heard plenty of anecdotal evidence that 2018 was a banner year for law firm financials. On Thursday, Wells Fargo released survey results that showed 150 law firms primarily in the Am Law 200, reported average revenue growth of 5.9 percent and average net income growth of 7.6 percent, the strongest numbers since before the Great Recession, my colleague Dan Packel reports for The American Lawyer.

From the story: “The big differentiator was that in 2018, for the first time in a really long time, what drove revenue was more than just rate increases,” said Joseph Mendola, senior director of sales with the Wells Fargo Private Bank Legal Specialty Group. “It was the combination of rate increases and increases in demand.”

On Silicon Valley and Local Competition: My colleague Xiumei Dong wrote a feature story on partner departures at Fenwick & West and other Silicon Valley law firms. It is worth a read for any firm interested in the dynamic of out-of-town law firms moving into your traditional home base. The general effect is that law firms founded in California or Silicon Valley are seeing departures from those home bases as new firms move into that market. It has happened in other cities, Chicago included. 

That's it for this week! Thanks again for reading, and please feel free to reach out to me at [email protected]. Sign up here to receive The Law Firm Disrupted as a weekly email.