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Is the billable hour responsible for the legal profession's supply-demand gap?

June 16, 2016  |  7 min read


The idea that there are "too many lawyers" is a common misperception. In reality, there are too few lawyers but, at the same time, too many lawyers without jobs. This is how, to speak in the broadest terms, the poor generally can't afford legal representation even as JDs who might otherwise represent them ply their trade as baristas.

This disconnect between supply and demand is largely the result of perverse costs, says Kenneth Grady, a lawyer and "Lean Law Evangelist" at Seyfarth Shaw. Grady, a former law firm partner who spent several years in various high-profile corporate roles, has dedicated his life's work to helping overcome the systemic inefficiencies that have driven the costs of legal services higher and kept access to justice at bay.

In this conversation with Logikcull, he explains how committing to lean philosophy can connect the ample supply of legal services with the equally vast, yet unmet, demand, but says deep-seated problems of thinking and incentives are preserving that gap.

Logikcull: Your title is "lean law evangelist." What is that exactly?

Kenneth Grady: We have to give Guy Kawasaki credit for the "evangelism" term. He was the first corporate evangelist, and worked for Apple many years ago. What he did and what I do today is try to convince lawyers around the world in corporations and in private practice that there is a better, more efficient, higher quality, "leaner" way to practice law than what we traditionally have done, and that it is to our advantage to make use of the tools of lean to improve how we deliver legal services.

There are many good reasons to practice lean. For one, our clients demand it, so that’s a good reason. Second, in the legal industry in general, we are struggling with an overwhelming demand for legal services, so we talk about ways that we can meet the demand given the resources that are out there. And third is probably one of the themes of our generation, which is better use of resources.

We have a tremendous amount of resources invested in educating and training lawyers, but we abuse lawyers by having them do things that they don’t need to do. So we could take that work they don’t need to do, throw it out the window, and focus them on the work that does need to be done. We would all be better off this way. Clients would be better off and lawyers would have more enduring careers.

So "lean" is a broad portfolio of trying to rethink how we deliver legal services.

Logikcull: Let's focus specifically on the supply and demand issue. There's a common perception that there are just too many lawyers. But you’re saying that’s not the case at all and that we’re not able to fulfill the demand that’s out there.

KG: Yeah, we have a real mismatch. In the U.S., there are around 1.2 million lawyers. Globally, we have about 2 million. The demand for corporate attorneys is generally well-satisfied. But at the same time, 80 percent of the legal needs of low-income individuals are not being met, and the majority of legal needs of middle-income individuals are not being met. 

"80 percent of the legal needs of low-income individuals are not being met."

And even if you go to the world of corporations, you find that corporations have a lot of demand for legal services with compliance, with regulation, and with globalization. There are a tremendous number of issues to be addressed, and the cost of addressing them has risen to a level where people have to pick and choose which challenges they'll confront. The amount of work that needs to be done is large and growing, but we don’t have this unlimited pool of money to spend on getting the services.

On the other side of the equation, we have lawyers who are in private practice who actually are underutilized. We have lawyers who don’t have jobs, who clearly are underutilized given their education. The reason they’re not getting as much work is the same: It costs a lot of money to hire lawyers to do work due to the way our legal services delivery model is structured.

So there’s a lot of demand and a lot of supply, but we're not able to connect the two because of this cost structure we’ve built. If we can figure out how to simplify the cost, we’ll find that clients will be using lawyers much more frequently and that lawyers will be engaged much more frequently.

"There is a lot of demand and a lot of supply, but we're not able to connect the two because of this cost structure we've built."

Logikcull: You've practiced lean law for more than two decades now. What have your major victories been?

KG: I look at victories in terms of incremental rather than radical change. I don’t think there’s been radical change yet in terms of hitting a major milestone in bringing lean into the legal industry. But in my career, I've seen a number of instances where you have the lightbulb moment. You hear people say, "I get it now. I understand we can do these things more efficiently. We can do them in a better way, without sacrificing those things that we should retain as part of practicing law."

This is going to be a war one day at a time and a person at a time. We are picking up momentum and reaching a tipping point.  

Logikcull: What are the barriers to reaching that tipping point? What are the most stubborn inefficiencies that you still see subsist?

KG: It’s not an inefficiency problem, per se, as much as it is that the industry is structured so that a lot of people benefit when more work is done. We all know that the billable hour is out there, and that it favors putting more effort into things.

"The legal industry is structured in such a way that a lot of people benefit when more work is done."

We need to embrace models that, instead of compensating based on effort, incentivize delivering value. We need to break the connection between time equalling money, because that’s a major impediment to doing things lean. If I’m paid by the hour, why would I want to spend fewer hours on something? That’s something that exists in the outside world.

"If I'm paid by the hour, why would I want to spend fewer hours on something?"

From the inside world, strangely enough and not talked about enough, we have a similar type of problem. Within corporate law departments, if you become more efficient, people will start to realize, "Well wait, if we can do things more efficiently that means instead of needing three people, maybe we only need two or one."

The solution to that, which the manufacturing industry has realized, has been to recognize that if you become more efficient, your costs go down, you are going to sell more products, you are going to deliver more to your customers, and therefore you will actually need more people because your business expands. There’s a pressure within law departments to not be lean because that may reduce your lawyer headcount.

The second problem we face relates to compensation systems. For lawyers, compensation systems don’t often reward becoming more efficient in terms of using less money, time or resources to accomplish things. The incentives aren’t there to make us very efficient, and if the incentives aren't there, it's hard to convince people to change what they're doing. 

"For lawyers, compensation systems don't often reward becoming more efficient in terms of using less money, time or resources to accomplish things."

A third hurdle that exists is tradition. Lawyers are trained from day one not to change things. So we’re trying to introduce this world of change to a group of people who from the day they set foot into law school have been trained to not change.

The challenge we’ve faced introducing lean into the legal community has not been the application of lean tools to legal work. It’s been the structural arrangement of the industry and the personality of lawyers within the industry and trying to break through those. Sometimes the change in personality is a slow thing that happens over time as new people enter the profession and people who have been in the profession leave. So you have some of that happening.

The structural part has been the real impediment in Big Law and in big corporations to making this type of change. You are trying to change an industry-wide valuation mode, and that’s difficult.