A New Model Law Firm – A Closer Look at Clearspire (part 1 of 2)
Traditional mainstream media have shown much interest in the legal market this year with articles on legal outsourcing, law school issues, and contract lawyers. The legal press and blog had already mostly covered these developments in detail. One topic MSM covered, however, was news to me and piqued my interest: a new model law firm. I first read about Clearspire in the Washington Post and, subsequently, the Economist. Intrigued, I arranged to meet co-founder Bryce Arrowood to learn more.
I prepared for my discussion with Bryce by reading the website. I start by sharing with what l learned from the web, then move on to report on our conversation. I also add my own observations. This post is part 1 of 2.
The Website Tells a Compelling Story
The website impresses with its elegant design and clear content. Most BigLaw sites fail to articulate a value proposition or competitive differentiators. In contrast, Clearspire explains how its new business model offers value and differs from other law firms:
- Lawyers Practice Law; Business People Run the Practice. Clearspire created two related business entities, a law firm and a business services company. This structure lets lawyers practice law while business and technology professionals focus on sales, finance, IT, and other support functions.
- Fees 50% Less than BigLaw. Clearspire delivers AmLaw 200 quality at fees roughly 50% less than BigLaw. It does so by slashing three legacy BigLaw costs. First, because Clearspire lawyers work virtually, the firm occupies less real estate and therefore pays less rent. Second, tools and technology built from the ground-up let lawyers work efficiently, which means they spend less time per task than BigLaw lawyers do. And third, because all attorneys are employees, Clearspire has eliminated the partnership pyramid.
- Predictable Fees and Transparent Work. An engineered intake process, project planning and management discipline, budgeting and reporting tools, and a team that consists exclusively of senior lawyers enable the firm to offer clients predictable fees and clear visibility to work in progress.
- Lawyers Earn Competitive Pay and Work Collaboratively. Clearspire saw that AmLaw 200 lawyers face a billable hour pressure-cooker. On top of this, the large firm environment isolates many lawyers. So Clearspire offers 80 to 1oo% percent of BigLaw pay for more reasonable hours and an environment that, though virtual, fosters collaboration. (Clearspire does have a downtown office for client meetings, business operations, and lawyers who prefer an office.)
- Technology Drives the Practice and the Business. The firm has built its own technology to support law practice, client management, lawyer collaboration, active matter management, knowledge management, and business management. It simplifies information access, experience tracking, and staff allocation.
The Impetus behind Clearspire
Clearspire co-founder Bryce Arrowood, a Harvard Business School graduate and entrepreneur, has deep legal market experience. He founded and built LawCorps, one of the earliest and ultimately largest contract legal staffing companies in the US when he sold it.
He saw that BigLaw and its clients’ interests aligned poorly. Bryce likens large firms to a guild, designed to benefit masters (partners) first and foremost. This has arguably been true for a long time so I asked if a specific event catalyzed Clearspire. Bryce said that a 2008 Financial Times article about UK legal market deregulation made him wonder what might be possible in the US. Subsequently, he read about the ACC Value Challenge and the proverbial light bulb lit up.
Bryce realized that by applying ACC Value Challenge principles, an entrepreneur could, even without US deregulation, attack the guild walls with a new-style law firm. He partnered with ex-BigLaw partner Mark A. Cohen to found Clearspire. Both worked closely with Sheldon Krantz (former Criminal Justice Chair of the ABA, DC Ethics Bar Chair and Senior Partner of DLA) to fashion the ethical foundation to the firm’s model.
Aligning interests was a key Clearspire goal: For clients, offer value in the form of predictable and lower fees with transparency into the work process. For lawyers, offer pay in the same range as BigLaw but allow more choice to strike a better work-life balance (e.g., no pressure to bill 2000 hours, bring in business, or make partner). And for the firm, earn a reasonable profit.
“Bread and Butter” Legal Work at Predictable Fees and 50% Off
To align interests, Clearspire needed a new model and a compelling value proposition. The founders realized that marquee lawyers are overkill for most matters. I shared with Bryce a discussion I helped initiate last year – “Bet the Farm” versus “Law Factory” – which breaks the world into two camps. In one, high-stakes mean price makes little difference. In the other, outcomes are important but are easier to achieve. This more routine work can be automated or highly proceduralized.
Bryce calls this a false dichotomy, saying it misses the vast middle ground of “bread and butter work” that neither requires “brain surgeon lawyers” nor can be easily automated or delegated to non-lawyers. This work, which he estimates at upwards of 80% of BigLaw revenue, requires the experience of ex-AmLaw 200 lawyers like the ones Clearspire hires.
To win this work, Clearspire offers a compelling value proposition: “bread and butter work conducted transparently at predictable fees that average 50% less than what BigLaw charges”. Achieving this of course took much work.
Building a New Business Structure, Investing Heavily, and Rolling Out Slowly
Building a firm to align interests and succeed in bread-and-butter-work at low cost pushed Bryce to come up with a structure that separated practice and business management. Clearspire Law, PLLC, is a multidisciplinary law firm of senior attorneys. Clearspire Service Company, LLC is an experienced business services company that specializes in business process management, including building and operating technology systems to support lawyers.
This structure allows the law firm to focus on law practice and the service company on business operations. With my legal outsourcing day job that includes selling business services to law firms, I agree wholeheartedly with this approach. Simply setting up two structures, however, was just the beginning.
Clearspire also needed to reduce cost. This meant questioning the usual assumptions. And it also meant a significant investment. The firm spent $5 million dollars to develop its own technology, research the ethics rules, and hire enough lawyers and staff to get started.
The firm was in the making for 2.5 years. In October 2010, it “soft launched” to test its approach, systems, and client reactions. In May 2011, it launched three practices areas (labor and employment, litigation, and corporate). Since then, it has won three Fortune 150 companies as clients.
Efficiency via Smart Processes and Technology
Clearspire recognized that the key to aligning interests and offering higher value was better processes supported by the right technology. The ACC Value Challenge articulates many process considerations that drive Clearspire:
1. Focus on outcomes and results
2. Provide clients with transparency and control
3. Use budgets and offer fixed fees
4. Staff matters appropriately
5. Track matters against benchmarks and projections
6. Utilize knowledge management (KM)
7. Leverage technology to increase value
8. Assess performance regularly as part of a continuous improvement plan
Before discussing two core processes, collaboration and matter management, I will focus on the technology itself.
The firm created its own information technology stack to support efficient and collaborative work. The bottom layer consists of several practice management applications, a combination of highly-customized, third-party products and proprietary systems. The custom-built middle layer integrates and aggregates data from the bottom layer. And the proprietary top layer is the user interface. This was an ambitious project and required top talent (see the IT team credentials). Bryce reports the platform can scale to an unlimited number of users.
The stack runs in secure, hardened data centers with real-time mirroring to a back-up center for disaster recovery. Lawyers and staff can access the system securely anywhere in the world on both notebook computers and multiple brands of mobile devices. Access to data and software features depends on device security and configuration. Users with Clearspire-provided and -configured equipment have maximum access and can use the most features.
The firm has already successfully used this platform with lawyers and clients around the world. It was built from the ground up to respect varying global data privacy requirements.
The technology sounds great and I hope to see a demo and write about it in a future post. Hearing the components and investment, I asked Bryce if the firm plans to productize and license it. He did not pause before answering “no”. Beyond concerns about sharing a key competitive differentiator, Bryce’s view is that without the human systems and process approach, the technology alone has limited value.
* * *
In my next post, I will cover how Clearspire approaches value and pricing by “chunking work”, fosters collaborations while reducing real estate cost, and views its competition. And I chime in with my own thoughts on its growth prospects.
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