Law, the most traditional of industries, has been undergoing a rapid transformation during the past decade. We've witnessed the rise of Alternative Legal Service Providers (ALSPs), aka Alties, which provide a different kind of service to in-house legal teams and do away with both the billable hour and high-frequency, low-value work.
These new kids on the block put a positive spin on the word 'alternative' thanks to the dynamic and innovative services they provide.
There are two breeds of ALSPs. The first is businesses that commoditize specific low-value legal tasks and receive outsourced work from law firms. Second is alternatively structured law firms that upend the billable hour method, often providing fixed-fee services to corporations and/or working as an extension of their in-house legal teams.
The value proposition of these alternative firms lies in their ability to slash legal costs. Traditional law firms are expensive. When you purchase their services, not only are you paying for legal advice but also the elite brand, impressive offices, a small army of associates, and partner bonuses.
Alties aren't about any of that. They hire top-tier talent but operate without the overhead or brand-associated costs, essentially providing the same services for less cost. Law Squared is a great example, a law firm that operates in a flexible setting and without the partnership model, preferring a flat structure over one with hierarchy. Founder and Director Demetrio Zema and Chief Operating Officer Trent Milvain explain how an alternative law firm operates.
Law Squared is an Australian based corporate, commercial, employment and litigation firm that provides on-demand legal services or does project-based work with clients. The firm is nationwide and its team work either remotely or in an office.
What are your thoughts on flipping the bums-on-seats method of the legal industry?
Demetrio Zema (DZ): We still have physical office spaces, but it's more about having a space where people can come together. We allow a lot of travel between cities. Covid was a notable example, we had people in San Francisco, London, Perth, Byron Bay, Melbourne, Sydney, and Brisbane who were all connected and working harmoniously. They understood what kind of levers they needed to pull to achieve their day-to-day outcomes.
The days are gone where people sit in an office 8am to 6pm to measure their productivity and where their managers must see them to trust they are getting things done.
Trent Milvain (TM): We've turned our attention to other technology businesses that are doing things a little bit differently. Something we look at when hiring people is how they can be appropriately onboarded and trained in a remote setting. We're looking to solve that problem using learning modules and videos to ensure the team gets the best experience when they come into Law Squared.
What sort of clients use you for legal services?
DZ: The best way to answer that is to explain our models of working. We have two models. The first is our Law Squared as a service (LSaaS) model with two options where we work as outsourced legal counsel. With option one we become general or legal counsel for a business that is yet to have in-house legal support. Usually this is for a growing or scaling business that might be at $50 million in revenue but the CFO or the CEO is still managing legal functions. They don't want a full-time legal counsel but they need employment, commercial and corporate help to manage their cap table. We appoint a relationship manager who liaises internally with our legal team to deliver services the business needs. The second option is where we act as an extension of an in-house legal team providing similar support. Often, they will have a resourcing need for either a short or long term leave cover, or have a need for a breadth of legal skill sets and unable to achieve that in one resource.
Model two is where we do ad-hoc or project-based work for clients, from a services agreement review to litigation support. This is fixed fee work, and we service multinational corporates to top 20 ASX listed companies, unlisted entities and venture capital funds.
How do you deliver value to your clients?
DZ: It depends on how you determine value. We don't record time, so what's essential for us is to understand the scope of work at play and project manage that accordingly. We have separate stages for specific work types and bill a client accordingly.
A benefit of a firm like ours is that clients always know what their maximum legal cost exposure will be irrespective of whether the matter is a corporate transaction, a commercial negotiation with a large financier, or a litigation matter.
Because so much of our work is done in-house, we truly understand the business. We have relationship managers for our clients who can be the negotiator of discussions between various teams. There's no handballing between different partners or practice groups without any context.
We don't have a traditional partnership model whereby partners are incentivized to compete to build their balance sheets and books. Essentially, we don't believe in that non-collaborative approach. This means teams are encouraged to collaborate and work together, there's no internal fighting or possessiveness over clients as happens in traditional law firms. Nobody gets any kudos or benefits at Law Squared for holding a client.
As a business we have three core values which we regard as paramount. One is to change the conversation about lawyers from a negative one to a positive one. Two is to create an environment and a culture for lawyers and legal professionals that I personally never got to experience myself - a culture I don't think exists in other firms. The third is to build deep relationships with our clients so they become friends.
The notion of friendship and law is a bit oxymoronic. People say, "You shouldn't be friends with your clients". It's more about the characteristics of being a friend, someone a client can trust, who has their back and is always there. Someone they feel comfortable calling up and asking, "Hey, how do you feel about this?"
What's your growth model?
DZ: Growth is about empowering our team to be able to build relationships with our clients and living our three core values. It means we aren't relying on individuals and we don't have the partnership model where clients are hoarded. Growth allows each of our team to interact with a client, whether they're the most junior or senior lawyer. That allows a true cross-pollination across our teams as very few of our clients only work in one practice area.
Our employees come to Law Squared because they want access to clients. They want the ability to build a relationship but they don't want to do so at the expense of others - which the traditional partnership model encourages - which is quite a unique model. We've had several partners from top-tier law firms join us over the past two to 18 months because they are tired of that non-collaborative, client hoarding approach.
We don't have a hierarchy at Law Squared. There's no partner, senior associate, or graduate lawyer - everyone is a lawyer - and we have legal teams and an operations team. Our operations team is not just a support function, it is a core pillar within the business. Each of our legal teams operates within a cluster model where people have various roles and responsibilities within the team. But again, it's not hierarchical in its nature.
TM: It's interesting. We're starting to see that the best talent is moving in other sectors, they want to spend time in start-ups and cut their teeth in venture capital firms.
We still face the problem that we have in-house counsel and GCs who are stuck in the generational mindset of hiring from top-tier law firms. There's an element of unlearning to do there.
Our model is different, and it takes time to teach the existing cohort those un-learnings. We're redefining what success looks like. We know success doesn't mean the younger demographic spending 14 hours a day in an office doing billable units for an annual 10 percent pay rise and $10,000 bonus.
We're working toward redefining success in the legal industry now and into the future. Many law firms have a long way to go on this. They still count the billable hour. It will take time for them to catch up; ultimately it will be a generational shift.
Redefining success for our people is really the most important thing.
When is it beneficial for a corporate or in-house team to use your services?
DZ: We are more suited to the business as usual (BAU) stuff, the work consuming legal teams and stopping them from focusing on the complex business problems that need to be solved.
What are your thoughts on traditional law firm pricing?
DZ: Change needs to come from clients, not from law firms. Clients need to actively set expectations around price. There is a disconnect between procurement and legal teams. Procurement measure of value still rests on the billable hour whereas legal teams are shifting. We see they often want to understand what their maximum cost exposure is initially because legal budgets are blown out so often.
What are your thoughts on young lawyers wanting to go straight in-house?
DZ: Ultimately, the problem starts at university level. There are still universities celebrating the fact that X percent of their lawyers are becoming graduates at top-tier firms. We're working with universities to change the mindset to celebrate X percent of their lawyers becoming legal ops people or graduates/lawyers at the likes of Law Squared.
We are no longer the second-tier alternative, we are a true alternative. The mentality of "if I don't get a role at a mid-tier law firm, I'll look at something like a Law Squared" is changing.
We're all on one playing field - whether it's a legal ops role at LawVu, a lawyer role at Law Squared, or KWM or Hall & Wilcox - we're all equals in terms of success for a law graduate and their future career prospects. However, the profession has some way to go to make junior lawyers in particular feel like they're not subordinate for not getting a job at a mid or top-tier law firm.
TM: In law, you climb your way up. You start as a grad lawyer, then associate, senior associate, then partner, which, as Demetrio says, is shouted from the rooftops.
There are other paths to success we don't hear stories about. What about the in-house counsel who went to Afterpay five years ago on a $100,000 salary but with 500,000 stock options? We're trying to change the conversation to be about creating an environment for success and thinking about what your legal career could look like if you worked with these cool businesses instead of the billable unit.
How are you leveraging technology to enable your business?
DZ: We are fortunate that there has been no need for any change management in this business. We didn't come from legacy systems and paper files, we started with a blank slate. I was by myself and I could choose whatever system I wanted.
It's important to caveat that people will ask how to get their firm to where ours is, but traditional firms often have a substantial change management piece to do. For us, we've always had a very flexible working environment with lawyers located in many places. Our tech systems have always been sound, so when Covid hit it was a nonissue. Two and a half years later, we're still floating half from home and half from the office. We obviously have excellent document management systems.
We have an internal digital innovation team, and we leverage LawVu's legal workspace product for our Law Squared-as-a-service clients. Whether that is client-led or Law Squared, we will still manage our internal engagement with those clients through LawVu, which allows us to scale and provides ultimate visibility and a great user experience.
The legal technology sphere is full of noise. There is lots of AI and data capture and fun things, which is excellent. But many of the conversations I'm having with legal counsel are helping them understand the fundamentals and the foundations you need to get right before you even look at anything else. These include an intake system, a centralized contract registry, and a contract and matter management system. Once you get those foundations right, you can look to reporting from legal data capture, external legal expenditure, building AI tools, and integrated self-service tools.