December 3, 2021

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May I ask, would you call your firm a ‘learning organization’?

What a law firm actively seeks to learn as an organization and culture, beyond legal knowledge and expertise, is a signal to in-house teams of its true ability to help their client solve real human challenges – whether legal, business, or administrative.

Summary

This LIO case study shares the story of Kelley Drye and its commitment to learn and apply new thinking and execution methods geared towards addressing unmet needs of their clients.  The firm is building a methodical innovation capability that is informed by client conversations that are unconventional for law firms.  This effort earned recognition from the Corporate Legal Operations Consortium in 2020 when Kelley Drye was recognized for their Legal Innovation in Operations (LIO) submission. 

In 2020, Kelley Drye launched a business solution for one of its clients.  The story of how Kelley Drye developed this offering and where it will take them holds instructive value for law firms seeking to create a culture of innovation as well as for corporate counsel trying to promote value-driven innovation in their outside counsel relationships. Their story provides insights into meaningful innovation efforts that directly benefit the client and can be markers for in-house counsel to seek out when analyzing their legal service provider’s value-generating capabilities.

 These include assessing whether their law firm:

1. has designed a structure and culture of problem solving into their compensation model (e.g., innovation hours’ credit)
2. makes cash investments to produce bespoke innovations for their clients
3. directly involves the client in defining, creating and integrating client business solutions
4. has developed and socialized a framework to evaluate, prioritize and execute client solutions

Encouraging your law firm to make similar investments and change their perspective on how firms and clients should interact requires the in-house team to not just sit back and wait for the firm to act. Clients have a distinct role to play. It begins with having a different type of conversation than perhaps the legal team is used to.

Dialogue questions

To prompt a helpful dialogue on the topic of being a learning organization, these model questions are recommended for raising the topic in a polite and non-threatening manner:

1. How does your firm utilize not just legal talent, but its business talent as well, to learn about us and find ways to generate new types of measurable value?
2. What type of professional development – formal or informal – is your firm driving that helps your people become more business aware and empathetic to their clients?
3. What would you suggest is the most effective way for your clients to engage you in a conversation about their business and professional challenges and goals?
4. Do your partners actively and openly embrace having business talent from the firm directly engage with your clients? If so, what have you learned from this that might be valuable to us? If not, how can we help you start doing this?
5. What does the concept of “innovation” mean for the firm and what do you consider its most critical ingredients?

Narrative

More and more corporate law departments look to their service providers to do more than provide expert legal advice. Clients expect their investments in these partnerships to add measurable value to solving their business problems, not just legal problems. For the traditional law firm model, this can be challenging and their efforts to meet this client desire can result in titles, committees and efforts cloaked under the “innovation” moniker.

Kelley Drye has taken a similar yet fundamentally more meaningful path. They didn’t want to just say they were innovative; they wanted to demonstrate it through client outcomes and a clear commitment inside the firm to learning how to increase the likelihood of generating innovative outcomes. They built a methodical innovation capability that is informed by client conversations that are non-traditional for law firms

Background

In 2018 Kelley Drye established KD Skunkworks, an internal working group focused on innovation.  Based on its exposure to the concept of design thinking, in June 2019 KD Skunkworks conducted empathy interviews with five different clients seeking to identify unmet human needs of the actual individuals within the in-house team. The goal of each interview was to identify opportunities to potentially create client value in ways not just inclusive of legal outcomes.  Those conversations generated five innovation ideas that were “pitched” in a firm Shark Tank-style competition. The winning pitch was to be funded by the firm and led to an organized effort to execute on it.

One of those ideas related to the firm client, META Advisors, whose Chief Compliance Officer Dana Kane participated in an empathy interview.  META specializes in post-confirmation administration of bankruptcy estates under plans of liquidation, plans of reorganization and out-of-court workouts. Large commercial bankruptcies can involve claims from untold numbers of creditors.  For each claim, various data points must be updated and cross-referenced, including the overall status, amount, priority level and documentation of the claim. META must also communicate information (including personally identifiable information) to and from creditors, outside counsel, financial advisors, and others.

The key insight that emerged from Dana’s interview was the sense of personal frustration she felt from hours spent reconciling data from different spreadsheets. This was not legal work; it was administrative and costly. A team from Kelley Drye collaborated with Dana to generate ideas on how automation might improve META’s workflow and create some operating efficiency.  This opportunity was chosen as the winning pitch to be executed and funded by the firm.  

Kelley Drye engaged a project manager and technology developer to bring this idea to reality.  After analyzing the existing process, Kelley Drye was able to automate key components of the workflow to reduce error rates, decrease cycle time, and minimize drudgery in the process and in Kane’s daily life. Now, META’s claimants and creditors are able to track the status of claims in real-time.  META is in their second year of using the solution, and recently, other bankruptcy trustees have begun to approach Kelley Drye about adopting the same solution.

Committing to Learn

When KD Skunkworks was started in 2018, Judi Flournoy, Kelley Drye’s Chief Information Officer, approached the firm’s managing partner to ask if the firm would support the idea of giving attorneys billing credit to spend time thinking about solving problems using technology.  He said yes, and that decision has provided Kelley Drye’s lawyers with a meaningful incentive to participate in the innovation-seeking process, all without necessitating any change to accounting systems or the fundamental operating model of the firm.

Since then, KD Skunkworks has matured into a more formal structure within the firm, and in the process taken on a different character.  Initially, KD Skunkworks was an informal working group consisting of technology enthusiasts.  Today it has evolved into the Client Services and Innovation Committee (CSIC).  This is an important milestone on Kelley Drye’s strategy roadmap because it defined a formal protocol for advancing learning and experimentation throughout the firm.  “I really do see a big difference because we have this very nice formal partner engagement with the CSIC at the highest levels of the firm,” explained Guy Wiggins, Kelley Drye’s director of practice management. Kelley Drye’s lawyers and professional staff now have a forum in which they can communicate their ideas and insights for how to make the firm more innovative and competitive, and the firm has a mechanism for evaluating, prioritizing, and executing such ideas.

The other significant change that has taken place is that the CSIC is not limited to technology enthusiasts.  “I don’t have any math or science background,” explained CSIC Chairman Bob LeHane. “In fact, I went to law school so I wouldn’t have to take statistics.” Jokes aside, LeHane takes the responsibility seriously, acknowledging that he faced a significant learning curve in his new role.  But the fact that the committee dedicated to innovation is led by someone that does not have a background in STEM is emblematic of a broader and very positive trend at Kelley Drye, which is that innovation is no longer the exclusive province of technologists.  Innovation is derived from an exploration about problem-solving, and diverse voices need to be present in that conversation from clients to legal practitioners and business professionals.

“Kelley Drye has been around for a very, very long time,” Flournoy explained. “It’s an old New York firm. I would go so far as to characterize all of the innovation-related efforts up to probably the last five years being purely driven by someone like me,” referring to her background in information technology. “Now, what’s happening and what needs to continue to happen is, those changes are being driven by others, which is really important to not only the culture of the firm but its survivability in a very competitive market.”

Focusing on Humans

An area that Kelley Drye has steadily been exploring is design thinking.  Design thinking encourages organizations to focus on the actual people for whom they’re providing services or products.  When you sit down to create a solution for a client’s business challenge, the first question should always be: what’s the human need behind the business challenge?

“What we’ve heard from clients over the last few years,” explained Flournoy, ”is that they don’t care about what we’re doing with innovation, what they care about is its impact to them personally, and how we can make things easier for them, more cost-effective, help them solve a business problem. That’s what they care about.”

Design thinking is a set of principles and processes that facilitates Kelley Drye in identifying, understanding, prioritizing, and ultimately fulfilling the needs of their clients.  “The design thinking methodology for us was instrumental in helping us get to what we wanted to focus on and then how to go about it,” said Flournoy. “The empathy interview component of design thinking was really important, particularly around META. It asks questions like ‘what frustrates you, and how might we eliminate that?’”

While design thinking is ultimately about identifying potential solutions, special emphasis is given to properly defining problems and their human roots.  To this end, the design process requires developing a human-centric understanding of stakeholders, which often necessitates asking questions about emotions, contexts, and processes.  Some lawyers might feel uncomfortable asking questions like these because:

• they are outside the scope of traditional legal conversations, or

• they perceive that it would violate some norm of privacy, or

• they are reluctant to ask questions they think could be perceived by the client as not knowing how to do their job or understanding the client’s needs.

Part of what makes Kelley Drye distinctive is that they are comfortable with and even excited about engaging in conversations like these with clients.  

CONCLUSION

Kelley Drye is evolving the scope of their services, and it’s not an accident.  They have become a “learning organization” that seeks to complement its legal expertise and brand with a distinctive problem-finding and solving capability. This is the logical consequence of specific decisions that were undertaken to unlock the potential of everyone at the firm, namely:

1. Creating a forum for submitting, evaluating, and executing innovation ideas

2. Providing a financial incentive for lawyers to participate in innovation projects

3. Intentionally pursuing ‘out of the box’ conversations with clients

Law firms that want to promote a culture of innovation can learn a valuable lesson from Kelley Drye.  The mere fact that an idea is approved by a committee does not mean that it will be successful in practice.  Some ideas will succeed, and some will fail.  But by establishing a protocol for experimenting with new ideas, a set of principles for first deciding which experiments should be run, and an organizational memory for studying the outcome of each experiment, Kelley Drye is maximizing their chances of discovering commercially successful innovations.