Why Institutions Don't Change

One of the curious aspects of modern legal practice and modern law schools is that, despite a lot of talk about how change is needed, not all that much changes.

While the Langdellian model of law school has always had its critics, starting sometime around the 1980s the volume of criticism seemed to rise. Law reviews began to feature a steady stream of articles identifying what was wrong with law schools. Commissions came and went, issuing reports on what needed to change. The post 2008 crisis hit law schools hard, and the volume of complaints went up again (with a fresh problem that the scam bloggers thought they were developing virgin territory).

It would be inaccurate to say that nothing has changed. There has been incremental change, much of it highly positive – additions to the elective curriculum, greater emphasis on experiential opportunities, mandatory or optional lawyering programs, to mention some.

Nonetheless, the model of law school has remained about the same. The first year curriculum would be recognizable to someone who went to law school a century ago, and institutional reward systems for faculty (promotion and tenure for those who publish articles and books about what the legal rules are and should be) are about the same.

The same process can be seen with regard to law firms and law departments. Way back when I was a young lawyer (and that was way back), plenty of clients were complaining about the perversity of the billable hour. By 1993 Fred Bartlit and his core team left Kirkland & Ellis to found an elite firm that would only engage in alternative billing, supported by the latest in technology. Contract lawyers and legal process outsourcers were brought in by outside counsel to take some commodity work away from higher priced corporate associates. Articles with titles like The Death of Big Law and books with titles like The End of Lawyers got published and widely read.

And yet, after all that, young lawyers still go to big law firms and count their days out in six minute increments, with all those minutes tracked and billed (when possible) to clients. Bartlit Beck is still pretty much one of a kind. In house lawyers look at alternative fee proposals and wonder where and how they will be screwed, and push back for billable hour models with caps or reduced rates. Altogether too much of the structure of lawyering would be recognizable to partners who retired while I was still in college.

Why is this?

Two theories seem to float around the most as explanations. I will call one the “selfish scoundrels” theory and the other the “clueless chump” theory.

With regard to law schools, I’d have to say the “selfish scoundrels” theory gets the most air time. The scam bloggers certainly view the core problem with law schools as an agency problem – law professors, they seem to believe, know what needs to be done, but simply don’t want to disturb their own comfortable existence by doing what’s right. You see elements of this approach in Brian Tamanaha’s Failing Law Schools and in earlier articles by John Elson.

The “clueless chumps” theory gets more play when talking about the legal services industry. Devoted to tradition, the meme goes, lawyers and law departments simply cannot see the change that is coming right at them. Like corporate executives at, say, Kodak who refused to believe that digital cameras could ever replace film, they can’t see what is obvious to everyone else. Great institutions are tragically entrusted, out of all the people in the world, to the few backwards looking dolts who cannot recognize what is happening all around them.

I’m not going to say that these arguments are totally without foundation, but I don’t think either really provides a good explanation of what’s going on.

I expect, for example, that there are some selfish scoundrels perched at law schools, but I meet a lot of US law faculty who care deeply about their students and the future of their institutions. Within the normal incidences of these things, I think law faculty and administrators are trying hard to do the right thing for their students and their institutions.

I’m also not sold that many major legal institutions are, in fact, run by clueless chumps (for that matter, I don’t think it’s descriptively accurate to say that Kodak’s leaders failed to recognize the challenge presented by digital photography). I think the folks running these institutions tend to be pretty savvy and pretty clued in to recent developments.

So why, then, are things at law schools and at law firms/legal departments/etc. continuing down the timeworn grooves despite all the warnings that change is needed?

Clayton Christensen looked at this twenty five plus years ago, wondering why companies that were technology leaders so often flamed out and failed when the next iteration in technology came around. What he learned was that companies that did not adapt to new developments – and hence withered or failed - were in fact well managed companies run by people who were trying to do the right thing by all their constituencies, especially their customers. Focused on their best and largest existing customers, institutions failed to take note of new breeds of actual or potential customers, or to adapt new technology that would not be valued by their existing customers. When change that reordered the market, the old patterns proved damaging if not fatal.

Christensen’s original work was on hard disk drive companies, which in the late eighties and early nineties were born, thrived, and died with lifespans more akin to fruit flies than elephants. As hard disk drive physical sizes shrank from 8” to 5 1/4” to 3.5” and on down, the established companies were slow to adopt the technologies that allowed miniaturization. The reason was not a lack of technical capability, but that their most valued customers cared more about other attributes – mean time between failures, or cost per megabyte. Only when the smaller versions could compete on those attributes did they challenge the existing companies, and by that time the game was all but played.

Christensen identified three aspects of what locks successful companies into doing what they’ve always done – their resources, processes and values.

All companies, and all institutions, have resources. These take many forms – brands, people, physical plants, patents, capital, relationships with vendors and customers, and so on. However, even the most successful companies have limited resources – Kodak, for example, had a lot of resources related to chemistry in general and making film and photographic paper in particular, but not so much related to electrical engineering. They had a powerful brand with regard to the little yellow box for film, but not nearly so powerful a brand with regard to their relatively mediocre mass market cameras. Organizations naturally tend to choose paths that use rather than replace their existing resources.

Institutions also carry out their work by processes. For example, a standard process in the modern corporation is the annual budgeting process, where priorities get set and resources allocated. Many innovations die in these budget processes – it can be career suicide for a mid-level manager to back an expensive loser in a budgeting process, but not so much to miss an opportunity that lies slightly outside his or her core responsibility. If something comes along that diverges from the norm – and all disruptive innovation does – it can vanish in the budget process. Hiring processes are another example – the safe thing is to link yourself to the hiring of someone just like all the people that have succeeded before, even if new times may call for new kinds of skills or talents. Yet another example would be the minicomputer companies who had well developed processes for designing and making every part of a new computer – this process worked well for mainframes and mini-computers, but when the rise of the microchip made modular assembly of computers easier and less expensive, the soup-to-nuts proprietary process proved a weakness rather than a strength.

Values are the third aspect. Christensen is not going deontological or aspirational when he says values, but rather referring to those things that an organization will support. An elite law firm, for example, might value generating high revenue per hour business but not commoditized work; a smaller firm built on lean processes such as The Hunoval Law Firm might invest in developing lower revenue per hour commoditized work. Organizations allocate resources and design processes towards results that are valued. In the legal sector, US News and the American Lawyer go a long way toward defining and enforcing values.

Taken together, resources, processes and values work almost like an immune system in protecting against really radical innovation. Innovation that complements existing resources, that fits within established processes, that delivers results consistent with established values – these ‘sustaining’ innovations take hold. Innovation that requires different kinds of resources, that doesn’t fit within established processes, that creates results not valued in the traditional framework – these innovations almost invisibly get pushed away or sidelined. It’s left to new entrants to develop these innovations, sometimes disrupting entire markets when they get traction. (I explore innovation in the context of legal services in greater depth here, with citations to Christensen’s full body of work).

That institutions do not change does not necessarily mean they are failing, just as strong immune systems can be a very good thing. Disruptive innovation can be oversold. There are times when established institutions are best served by implementing sustaining innovations. Christensen points out that most technological innovations are sustaining, and so are developed or acquired by the dominant legacy players. Power steering and color television, although significant technologically, didn’t really re-order business hierarchies.

It’s also hard to tell when new business models or new technologies will lead to disruptive rather than sustaining changes. If there’s a valid criticism of Christensen’s work, it’s that while he explains well what has happened when new entrants topple entrenched leaders, he’s done less well at predictions – sometimes, technological or business model changes that promised disruption end up serving the established leaders. When I was young, people were predicting that online research and fax machines would challenge big law, and that wasn’t close to right.

I do think he’s spot on in diagnosing why companies don’t change even when change seems imperative. Companies and other institutions have a hard time abandoning the resources, processes and values that have helped them excel in the past.

For both law schools and law firms, we live in an age where market disruption and technological innovation will drive changes. It’s not clear – or at least not clear to me – how much of the change that results will be sustaining, entrenching the existing leaders, and how much will be disruptive, allowing new entrants to displace existing champions.

Both in law firms and law schools, many people seem to be pondering these sorts of questions. If you want to think about why a school or a legal services institution isn’t changing as fast as it might, Christensen’s insights are extremely helpful. Not much progress comes from accusing the players of being selfish or clueless. Getting a handle on what actually impedes change comes a little faster when you break an institution down into resources, processes and values and think about what kinds of change those might embrace or block.

Comments

[Former Editor]

Excellent post. It often gets forgotten in the law reform discussion that there are multiple constituencies involved and that well-meaning people can be at odds as to what the right solutions are and how quickly they can or should be implemented. This piece is a good reminder to those of us interested in law school reform that many law schools are honestly "trying to do the right thing by all their constituencies" and that there are institutional barriers to large and immediate change.

[Brian Tamanaha]

Ray,

I do not assert that law professors are selfish or scoundrels. What I do assert is that we are not selfless people engaged in public service, as some legal educators are wont to claim. (These are well paid and comfortable jobs from which we cannot be fired.) There is a clear difference between these two assertions, though law professors who feel insulted by my argument have confused the two.

We (that includes me) are all operating within a system and responding to a set of incentives that channel our activities. My book was not about the personal character of law professors but about structural conditions we benefit from that have contributed to the high cost of legal education. Among those structural conditions are aspects of institutions that resist change, like those you point out in this post.

Brian

[Anon]

Excellent post, even if some of the points about free-market dynamics don't necessarily apply in the law school context.

This sentence jumped out at me: "Hiring processes are another example – the safe thing is to link yourself to the hiring of someone just like all the people that have succeeded before, even if new times may call for new kinds of skills or talents." I would add that law-school hiring decisions might be motivated not only by outdated notions of what will make for a "successful" law prof, but also by a sort of dues-paying mentality: "I did X, Y, and Z in order to become a law professor, and this applicant (whether or not s/he is likely to be "successful" in a way that matters now) didn't do any/all of those things..."

[Ray Campbell]

Brian - Thanks for the clarification.

[W. David Ball]

Thanks for this thoughtful piece--although I have to say my opinion about Christensen's work dimmed considerably after reading this thoughtful, meticulously-researched article by Jill Lepore in the New Yorker ("The Disruption Machine," June 23, 2014, found at http://www.newyorker.com/magazine/2014/06/23/the-disruption-machine). DB

[anon]

"While the Langdellian model of law school has always had its critics, starting sometime around the 1980s the volume of criticism seemed to rise. Law reviews began to feature a steady stream of articles identifying what was wrong with law schools."

Or, is it simply that this is when you started to pay attention?

Did this "steady stream" decry the cost of legal education and debt loads when compared with the likely earnings for attorneys; did this "steady stream" decry the drift of legal scholarship away from the law and anything of real benefit to anyone and toward obscure and pointless pursuits in disciplines other than the law (under the pretext of "intersection" study by Ph.D.s in fields other than law); did this "steady stream" of law review articles note the failure of the legal academy to keep pace with the market for legal services?

Cites, please.

Your series of lengthy posts describes facts that are not facts (e.g., the risible notion that the vast majority of attorneys and clients care at all about "predictive coding"), makes sort of specious analogies to pursuits other than law (like golf and weaving) and generally, trashes the "Langdellian method" ... but I'm wondering: what is your point?

What do you want to see in law schools? A short, cogent explanation would serve to put the reams you are writing in some sort of context. You say that a lawyer solves problems.

What has all this to do with solving anything?

[Ray Campbell]

Lepore's piece is worth a read, but I don't think people who run VC firms are going to start carrying around her article instead of Christensen's work (which is way, way more than his first book, which is all she really seems to engage with in other than a mocking way). I think she's right that there has been some uncritical sloganeering around disruption, and I think she's also right that it's really very hard to determine when a new technology or business model will be disruptive. That said, I think Christensen's work is solid, and that people ignore it at their peril.

I think one reason Christensen's work resonates with me is that I lived the process before really getting engaged with his work. At the start of 1997, which is the same year Christensen was to publish his first book, I made the somewhat loopy choice to leave an equity partnership at one of the best law firm partnerships on the planet to start an e-commerce retailer in what turns out to be a surprisingly conservative industry, selling musical instruments and recording gear. It's a long story, and one best told over cold beverages, but I got to see lots of innovation that seemed disruptive but ended up being sustaining for organizations who could modify their resources, processes and values. I saw other companies unable to shift enough to absorb the changes brought by the internet, and who thus went belly up, and still others who defined their value proposition in terms of things that the internet could not do well. When I finally got around to carefully reading not just Christensen's first book, which seems to be all that most people have read who throw around the term disruption, but also the later works in which he develops the theory, it seemed to explain a lot of what I had lived through.

Part of the lesson of Christensen, which gets covered up in all the talk about disruption, is that most innovation is sustaining - existing companies are able to adapt new technologies and new business models to their resources, processes and values and use them to strengthen their position. Cell phone carriers figured out how to shift out to digital from analog technology, for example, and kept right on (Motorola, on the other hand, was slow to move to digital, crippling their handset business in a way they never quite recovered form). Intel has figured out how to make sure that the next, cheaper generation of microprocessors comes from Intel, instead of from a disruptor down the street (something on which Christensen consulted). When change is afoot, it can be either disruptive or sustaining, and one of the reasons that is hard to predict is that it does not play out on a set field - companies sometimes can fit the change into the resources, processes and values and make themselves stronger.

One of the reason's Christensen's work fails at prediction has to do with the fact that everyone has read his book - the world he first observed no longer exists because smart managers now inevitably move on to a discussion of disruptive risk. I think sometimes of that scene in Patton where George W. Scott is observing what Rommel's tanks are doing, and exclaims that he's read Rommel's book and makes adjustments accordingly. Good managers (but not necessarily legal academics) are now aware of the risk of disruption and the constraints of RPV, and take it into account in planning strategy.

Here are some responses to the Lepore piece that are worth a look for those interested:
http://www.forbes.com/sites/forbesleadershipforum/2014/06/30/what-jill-lepore-gets-wrong-about-clayton-christensen-and-disruptive-innovation/
http://www.slate.com/blogs/future_tense/2014/06/23/clayton_christensen_jill_lepore_agree_disruptive_innovation_has_become_a.html
http://www.businessweek.com/articles/2014-06-20/clayton-christensen-responds-to-new-yorker-takedown-of-disruptive-innovation

[Ray Campbell]

Anon, I don't have time to prepare a full bibliography, but here are a couple of cites to help you get started:
The Maccrate Report from 1992 - http://www.americanbar.org/content/dam/aba/publications/misc/legal_education/2013_legal_education_and_professional_development_maccrate_report).authcheckdam.pdf
The Maccrate Report drew on some of the prior work and is cited by pretty much everyone who has written on the law school curriculum since. The report identified a gap between what law school teaches and what lawyers do, and proposed some curricular changes (e.g., more experiential education, more externships) to help bridge the gap. Maccrate and its progeny have had an impact on what law schools do, but arguably not nearly enough of an impact.

Judge Harry Edwards' influential article on legal sccholarship - Harry T. Edwards, The Growing Disjunction Between Legal Education and the Legal Profession, 91 MICH. L. REV. 34 (1992). Judge Edwards was a distinguished law professor at Michigan before becoming a prominent judge, and his argument that legal scholarship was self serving and failed to meet the needs of judges or lawyers got a lot of attention. Again, if you follow those who have cited this article, you will get pointed toward most of what has come since.

[anon]

Ray

I think your response demonstrates that your point was not well taken. Of course, there has long been a tension between theory and practice, and the bar has clamored for more practical training in law school for a long time.

In fact, that tension is healthy; the pendulum has swung way too far toward useless theory; and hopefully, hiring practices and curricula will soon catch up with reality.

But, that wasn't really the point of your post. Or, my comment.

I asked:

Did the "steady stream" (of law reviews to which you referred, that you claim steeply increased in the 1980s) decry the cost of legal education and debt loads when compared with the likely earnings for attorneys; did this "steady stream" decry the drift of legal scholarship away from the law and anything of real benefit to anyone and toward obscure and pointless pursuits in disciplines other than the law (under the pretext of "intersection" study by Ph.D.s in fields other than law); did this "steady stream" of law review articles note the failure of the legal academy to keep pace with the market for legal services?

I think not. Based on your response, I would conclude that you agree that the correct answer is no.

But, far more importantly, I'm still waiting for your response to a basic question about your long posts:

Your series of lengthy posts describes facts that are not facts (e.g., the risible notion that the vast majority of attorneys and clients care at all about "predictive coding"), makes sort of specious analogies to pursuits other than law (like golf and weaving) and generally, trashes the "Langdellian method" ... but I'm wondering: what is your point?

What do you want to see in law schools? A short, cogent explanation would serve to put the reams you are writing in some sort of context.

You say that a lawyer solves problems.

What has all this to do with solving anything? What is your point?

Your posts are just drifting thru observations, some more valid than others, some completely without merit and so self referential as to be ludicrous in the main, but all disjointed and sort of lacking in any practical theme or purpose.