Transcript of Beyond Billable -Driving Conversations with Rutger Lambriex

Pim Betist: Welcome to Driving Conversations.

Rutger Lambriex: Yes.

Pim Betist: Let's get you introduced first. Can you tell the audience a little bit about your background?

Rutger Lambriex: Yeah. I just joined Venturis Consultancy. A niche firm, a management and strategy consultancy firm for law firms and general counsels. But prior to that I've been with HVG Law, which is the law firm of EY Law in the Netherlands for more than 25 years, of which I spent 10 years in New York. Most of the time being the managing partner of the law firm of EY Law in New York. And after 10 years when I came back, I became responsible for the legal supply chain practice in EMEA for EY Law, took on some executive roles. But the last eight years, I spent as a leader of the legal operations practice of EY Law in EMEA. First setting it up and then leading it. And I left EY Law/HVG the first of January.

Pim Betist: Great. It sounds like we have a lot to talk about with your background.

Rutger Lambriex: I hope so.

Pim Betist: I mean, your specialty in legal operations I think is really applicable to the situation in the market right now because things are changing really rapidly. And my first question would be, if we take the vantage point of the law firms first. We're gonna obviously cover both. But if we start with the law firm's perspective, what is the most important question law firms should be asking themselves right now?

Rutger Lambriex: I think the most important question they should be asking themself is, how am I going to earn my money in five years time?

Pim Betist: Okay.

Rutger Lambriex: I think that question is older than today, but it becomes more and more urgent with the introduction of AI. Because that really is gonna turn the legal practice and the legal market upside down. There have been developments earlier that could have led to a serious discussion about how I'm going to earn my money in the future. But AI makes it really urgent.

Pim Betist: And asking the question is one, but answering it is second obviously. Do you have any ideas what are law firms going to make their money with in five years time?

Rutger Lambriex: I think it depends per law firm. And I think, yeah, it's an exercise to get to that answer. First of all, the big question is where are you now and where do you wanna go?

Pim Betist: Right.

Rutger Lambriex: But there are some important elements that are outside of your own control, and you have to take that into account. And I think the key element, especially for the mid-size and larger law firms is, what are my corporate clients going to do? The corporate clients are also going to use AI.

They are already using alternative legal service providers for commodity and the low complex work. They're already outsourcing to service providers certain type of work. And now AI is taking also away part of the traditional legal work, the drafting of documentations, and at least the initial phase of giving advice.

So then as a law firm, you have to think, "Okay, what part of the pie is left for me? And is that interesting enough to make my money with?" And that could mean, yes, I've got services that I can continue to perform for clients. Or it may mean, hey, those services they may not be asking anymore. And I either need to change the format of those services or I have to look for other services I can provide to them.

Pim Betist: Okay. And let's assume that somehow you do this correctly. That has a huge amount of implications on the operating model.

Rutger Lambriex: Yeah, it does. Because first of all, you're gonna seriously look at your business model, and then you need to implement what you're going to do. And then if you look at your operations, those need to change. And that varies from the type of people you're hiring, to the influence of technology on your services, to reshaping the relationship with your clients. And if you look at reshaping the relationship with your clients, that means you truly have to understand what they're looking for, what they're going to do themselves, but also what they need you for. Because they're gonna be more and more critical. Do I really need to involve a law firm for this type of work, or can I go to somebody else who's much cheaper and maybe more specialized in commodity and less complex work? Because lawyers traditionally view, in general, every case or every issue as unique and ad hoc, which is truly not the case. The majority of the work isn't that complicated. So you either have to start providing those less complicated services in a very efficient way with the use of technology and, or you then have to focus on the more complex work for which you really have to hire high-end legal professionals. And an average legal professional may not do for that work anymore.

Pim Betist: That sounds like a lot. Let's unravel that.

Rutger Lambriex: Yeah, it is.

Pim Betist: Can we take them one by one?

Rutger Lambriex: Yes. Sure! Which one do you wanna start with? I think

Rutger Lambriex: One: you have to truly talk to your clients.

Pim Betist: Yeah. That's the one I wanted to start with. And maybe it's also interesting to change the vantage point to their perspective now?

And in our conversations before we had this drive, we talked about a matrix of a win-win matrix between the client and the law firm. And I can assume this has something to do with what you're going to tell us next. 

Rutger Lambriex: Yeah, absolutely. At the start, if you look at the way law firms work with their clients, they may have long term relationships, but the work to actually do is very transactional.

Pim Betist: Okay.

Rutger Lambriex: I mean, they go from project to project, from issue to issue. And I think what clients are looking for are more partnership relationships, where you truly work together on certain type of issues, where you provide services on an ongoing basis, where maybe the law firm has access to more data of the client than it has now to truly serve the client. And that you work transparently with each other. And if you want to go to a long term partnership relationship, you then have to ask the question, "Okay. What creates true added value for my firm?" But at the same time, you have to ask the question, "What is the true added value and what kind of added value is there for the client?"

And if you talk about the matrix, if you picture a graph with on the horizontal the client benefits and on the vertical the law firm benefits and you picture in there four quadrants. Then if the first quadrant is where there isn't hardly any added value for the client and there isn't hardly any added value for your law firm. That's an easy one.

Pim Betist: We don't do that one.

Rutger Lambriex: You don't do the work, and the client doesn't want the work.

It gets more interesting with the other three. And then the first one is hardly any value for you, low margin or not interesting, strategic, not important, but high value for the client. That's a difficult one for yourself. Because do you want to truly specialize in a service that doesn't create added value for yourself? It may be nice for the client, but for yourself is not a long term strategy.

The other option is, or one of the other two options is, you pick the one that has high value for you, but low value for the client. Let's say simple, charging a lot for very simple commodity work. That may have a high value for you, but a low value for the client. That's not sustainable because the client will find out and will go to somebody else. And at the same time if you lose trust in relation to that kind of work, they're not gonna use you for any other work either.

So the only quadrant of those four that actually really works is the one with high value for you and high value for the client. And that creates a long term relationship. And that could either be very high end complicated legal work, which they can't outsource to other providers or which is too complicated to do themselves. Or it may be a very sophisticated way of providing repetitive commodity work where the client has added value and you've added value. And especially that kind of work requires some adaptations to your ways of working, to your operating model. But the interesting thing is, of course, that that work at first doesn't seem to be very interesting to you. But what they sometimes say is, "Data is the new oil." And you see it already, what, for example, the big four do with other consultancy activities. They help their clients with fairly standard work that can be commoditized. But by doing that work, they get to know the client inside out and are in a very good position to help that client in more complicated situations and issues as well. Using all the data, information, experience they gain in doing the more commoditized work.

Pim Betist: Can you give an example of commoditized work that could be outsourced like that?

Rutger Lambriex: I think contract drafting.

Pim Betist: Okay.

Rutger Lambriex: Often what you see is law firms are still approaching, at least to a certain extent, drafting contracts as an ad hoc unique activity and that can be standardized. There are tools, there is technology that can help draft agreements.

Pim Betist: Right. So you're saying that the law firm should actually be proactive and not only provide the service by humans, but actually create something that is automated and digital, and outsourced to basically AI. But then led by the law firm.

Rutger Lambriex: Yeah. And preferably in cooperation with the client. So I prefer to talk about creating a contractual framework for a client instead of drafting agreements because you basically then discuss with the client what kind of agreements do you actually need, what's the volume of those agreements? What are the risks associated to those agreements and what's the commercial interest of those agreements?

Pim Betist: Right.

Rutger Lambriex: And then together you can work on templates and variations of those templates and automate those in a tool. And if you then make the tool accessible for the client as well you basically have a joint collaboration tool where you can create agreements. And so that you, to a certain extent, standardize and automate the production of those agreements. And yes, of course, especially above a certain value or with a certain risk, you need to have an additional look at those agreements. But based on data, you can determine what agreements that applies to. And then you really simplify the drafting of agreements, and you can include the tracking of agreements. What happens to those agreements going forward during the term of that agreement? So you probably earn less top line as a law firm. But your bottom line may be higher because of the efficiency and the work that comes out of those agreements in the future may be the most interesting part.

Pim Betist: Yeah, because you're close to the ball.

Rutger Lambriex: Yeah, exactly.

Pim Betist: How about the high value stuff? What I hear a lot of people talk about is preventative consultancy or legal consultancy. Is that something that law firms should go toward?

Rutger Lambriex: I think so, if they're able to. Because what you see is that you're talking about regulatory issues and geographical risks. There are service providers that are ahead of them. But I think it's very important, especially for the multinationals, to receive those services. Because there's been a survey recently, where general counsels in the US, in Asia, and in Europe have been asked what are their worries, what keeps them up at night. It's not the M&A deal. It's not a contract. It's the rules and regulations and the compliance.

Because that becomes more and more serious. And if you, as a law firm, are able to provide those services, again, in cooperation with your client, and I mean not just throwing a memo at them, but truly understanding the business models, the risks of the business, and then tailor the risk advice and the compliance advice and help them also implement it. That's a very interesting preventive part of legal advice.

Pim Betist: So we covered the first one, the client relation, and then there were two other ones. Forgive me, I don't know the other ones by heart now.

Rutger Lambriex: Let me think as well. The client relationship... The client relationship, well, I think there are more than two additionals. If you look at pricing, you need to adapt that.

Pim Betist: Right.

Rutger Lambriex: You have to seriously look at your pricing. Does it still make sense to charge by the hour? Or maybe from the examples I gave about new services, it may be clear that that doesn't really work anymore. You have to go more to value-based billing. So I think that's an important one. And if you look at your pricing, then you also look at your operating model. Who am I going to use for what type of work? And if you look at a traditional law firm, most people who work there, regardless of the role they have, is a lawyer.

So not only the advisors, but also the other specialists. Because the partners take on a certain role, and that could be the leader of the IT department or that could be the leader of the HR department. Well, I think if you truly want to adapt your organization to a 21st century tool like AI, then you will have to bring your organization into the 21st century as well.

And that means you have to delegate certain roles and responsibilities to other people than lawyers. And HR is gonna be a completely different ballgame. Because hiring technical skilled people, hiring process managers, hiring sales people is different from hiring lawyers. You can't copy the way you hire lawyers to those. 

And then it's not only the hiring, but it's also how do you run a department? Who has the final say? And if IT and technology becomes so important, then it does make sense to give an IT leader a serious position in your law firm, not always being overruled by the interest of the individual partner who may or may not want to go the route of more digitalization.

Pim Betist: I've seen the record industry, so the music industry, basically fail at adapting to the new reality. Huge organizations basically suing their customers and making a deep dive into what is now ruled by Spotify and a little bit by Apple Music. What is your maybe hope or projection in the capability of this industry to make the necessary changes? Because it's a completely different world that you're describing. I mean, it's so different from what it is now. How high is the chance that firms are going to be able to make this adjustment?

Rutger Lambriex: I don't think that lawyers and law firms will be replaced by AI. But I think that lawyers that do not work with AI will be replaced with lawyers that do work with AI. And what I mean by that is not only implementing the tool, because AI is so much more than the technology itself. It's your operating model and it's your business model. And I think, yes, there are law firms who are capable, but I think it has to come from the bottom, bottom-up. You see younger lawyers becoming more interested in technology and efficient ways of working. And it has to be said, even the law firms that do not have AI implemented yet, or do not have a policy, the younger lawyers are using AI. And people may have heard about it, but it's called like dark leisure.

Pim Betist: Yeah?

Rutger Lambriex: Where a partner asks a trainee, "Can you please draft an agreement for me and you can use eight hours?" And then the trainee says, "Yeah, that's okay." And he or she may work from home. With the help of AI drafts the agreement. It's done after four hours. May go to the gym or have lunch with a friend. And then at six o'clock sends in the agreement.

Pim Betist: Yeah. I actually overheard someone in a coffee joint somewhere boasting about this, like a young guy. This exact example. Like, "Yeah, I finished in two hours and I'm billing eight hours."

Rutger Lambriex: Yeah. And I think if you, as a lawyer, young lawyer, you see that happening, then if the law firm you work for is not adapting to the modern ways of working, then you probably at one point decide to go on your own.

Pim Betist: Right.

Rutger Lambriex: So in that sense, yeah. So, you have to find other ways of attracting young talent. And that means you need to use technology. You need to use AI for that. And at the same time, you also have to think about what kind of lawyers am I looking for? I think some of the work continues to be really complicated and you need the best in class for that. The traditional best in class lawyer. But at the other hand, you may also need lawyers to sell your services.

Because those long-term services, that's more partnership services. Are partly legal driven but also partly efficiency and client relationship driven. So you need different type of people.

Pim Betist: And let's assume that this change has happened. Now what? Because now you have a completely different operating model. What implications does that have?

Rutger Lambriex: You need to look at your governance of your organization. As I said to you, such a law firm can't be run only by lawyers. But you will need to have a chief financial officer who knows how the financial world works. You need a tech officer on board. You need certain checks and balances in the organization. And ultimately, I think the legal world is very traditional. And lawyers tend to spend a lot of their time on non-legal work, whether it's a presence for the associates they're gonna have a discussion about at the partner meeting, or whether it's being involved in IT or finance, which they not truly understand. While the people are the capital, so then I would say if you are a highly intelligent lawyer capable of doing the more difficult work, why are you not gonna do that eight hours a day? And stop doing two, three hours of work you're at least not as good at as the specialist you're going to hire. And that means the world of lawyers because I think it's all opportunities also for the lawyers. Because you get more opportunity and more space to do what you're actually hired for, doing the complicated legal work and not the standard commoditized work, which is not really interesting for you. And not the other work that comes with running a law firm: the financials, the hiring, the whatever. And if you're interested in that, you could, of course, always swap. But what you see is that people have to meet a target and they have to do HR.

Pim Betist: Yeah. It always puzzles me why it's so important that people who work with lawyers speak the lawyer language. What is that? What is the reason for that?

Rutger Lambriex: That's a good question. Lawyers are trained completely on content. If you go to university, it's purely content. You don't get any social skills. You don't get any idea about other things that are important. So if you then as a lawyer start a law firm, you think that the people who know the law are the most important ones and they know how it works, and then the interesting switch is easily made to I also know how other stuff works.

And I can give an example of myself. I started in a traditional law firm. And in an M&A deal, and this is 25, 30 years ago, you also had tax advisors. But the lawyer was the most important one, in my perspective. And then suddenly you go to another organization, like EY, where you've got a multidisciplinary team, and you suddenly find out the tax advisor is actually really important. The strategic advisor of the client is really important. The finance people who advise the client are really important. And then you suddenly find out that if you truly look at the added value for the client, yes, things need to be legally correct, but at the end of the day, you talk shareholder's value. And who creates the shareholder's value? That is often the business, the finance and the tax. But that's a journey for lawyers, to be honest.

Pim Betist: Yeah. A big one. And they're gonna have to do it fast.

Rutger Lambriex: Yeah.

Pim Betist: So what would be the step-by-step process to incorporate that? Because there's one last step to get to good governance. And I guess that's changing the incentive program?

Rutger Lambriex: I think if you do it step by step, of course you have to start with the AI itself.

Pim Betist: Okay.

Rutger Lambriex: You need a good tool. You know more about it than I, but I think if you look at the quality of the tools in a couple of years, the survivors of the tools will all have similar quality. And then it's gonna be about services and what meets your requirements best. So you need to be seriously advised on that. And to be able to get serious advice on that, you need to analyze your business. What kind of work do I actually do? And what is my current technical landscape?

And then you basically paint a picture, where do I want to go? And then you're able to pick a tool. And I always say, don't enter into a long-term obligation, but try one for a year.

Pim Betist: Good idea.

Rutger Lambriex: And then the important element is teaching the people change management. Teaching the people how to work with AI. And that includes adoption. Make sure that it's truly adopted. And then the next step is, okay, then you may want to integrate the AI tool in your technical environment. And you may have to make changes to the technical environment as well, if it doesn't meet the 21st century objective. But once you've implemented the tool, and once you've integrated the tool and people work with it, then the next step, of course, is how can I truly benefit the most of AI in doing business? And then you go back to the first question we discussed: what's my business model now? How do I make my money? And with the impact of AI, how am I going to make my money in five years time? Taking into account competition, alternative legal service providers, behavior of the clients, the capabilities of AI, et cetera, et cetera. Developing new services, maybe saying goodbye to certain services. 

And then of course, once you've defined your future business model, then you get into your operating model. How should I change my model to make sure that I can deliver what I want to deliver? 

And then you look into the changing role of the lawyer, a greater variety in people that are working for the firm. You look at your pricing, you look at your workflow, you look at your work processes. Where do I do AI, and where do I put in the checks and balances? But also, how am I going to deliver those services to the client? And then you could have a look at contract management. Almost fully automated tools that you work on with your client together. You could think about automated regulatory mapping for your client. And then once you've got your operating model in order, and your pricing in relation to what you're gonna charge, then you have to look at, how am I gonna govern my organization? Because the nature of your business has then changed. Your risk profile has changed, and your relationship with the clients has changed. And that means, okay, how am I going to run it? Who is in true control of what's happening in the firm? And if it would be up to me, then I would think more of a corporate model than a partnership model.

Pim Betist: Can you elaborate on that?

Rutger Lambriex: Well, with the corporate model, the organization is made up of a board of directors with clear described roles and responsibilities. And with the clear described roles, responsibilities of shareholders. So maybe partners should become true shareholders. And the one who's providing the knowledge and the specialty advice. But for a large part of the way the firm operates, give it to people who are specialized. And those people could be lawyers, but what you often see, it's the partner that performs best financially often at one point in time also becomes the managing partner. Is he or she truly the best person to run the firm, or do you need a qualified CEO for that?

That's the big question. And your risk profile changes. Your investment profile may change. You may work with third parties on certain activities. So yeah, that's a different ballgame than running a firm that runs on paper.

Pim Betist: And runs on billable hours.

Rutger Lambriex: Yeah, and runs on billable hours. And that's also an important change that need to happen is what are you gonna do with the KPIs?

Is the billable hour truly important? And I said in the beginning, some of those issues are older than AI. I know the story about large restructurings, large reorganizations where like a gazillion documents need to be executed to make that happen, internal restructurings. But often those documents are all pretty similar. So if you then charge per hour, then it doesn't match the activity anymore. Because you can draft this, somebody can draft 10, 12 similar agreements in a day.

And what do you do then? Are you gonna charge per agreement or are you gonna charge per hour? If you charge per hour, then what's the basis? If you sell an agreement for 2000 euros, are you going to then write six hours or four hours or five hours? It doesn't make any sense because if I then draft 10 agreements a day, and I charge 2000 per agreement, am I gonna charge them 40 hours? It doesn't work.

So who is gonna write my hours? So you better then go back and say, "For me, no, we not do hours. We do value billing." Your project gives you a certain benefit. You're doing that because you're saving money with it. So if we do true value billing, then the whole project is X. And then it's really not important how much the agreement costs. It's the outcome.

Pim Betist: So you're going to go from a one-dimensional incentive program to a multi-dimensional incentive program, because everyone needs to be judged on their specific capabilities that are necessary for the organization to survive?

Rutger Lambriex: Yeah. And it means that you have to look for different capabilities and business development is a separate unit in a lot of law firms. Those people don't sit in the fee earner chain. You never become a partner, I think, if you are a business developer. But how important will the business developer be in that new organization? Much more important.

The finance person as well. I've done a project a couple of years ago with a client where we basically were reviewing end user agreements for them globally. And they were drafted under US law, and we would review those agreements. And the deal was we both need to benefit. So you need to have a sophisticated margin, but we need to show savings on our side, the client's side, an increase in speed to market with those agreements. So we found a way of charging the clients per review, and we standardized the review, and they gave us a number of projects a year. And at the end of every year, we sat down and we said, "Okay, what kind of project did we do? What was your true margin and what was our true benefit?" And one year it was, "Hey, your margin is really high and our benefits didn't come through. We have to do something about the pricing." But the next year could be the other way around, where our margins were disappointing and the client benefits were high. And then in full transparency, we adjusted the charging mechanisms to ensure that we could both benefit and continue the service. And then

Pim Betist: It sounds so unique. I mean, the amount of trust that is necessary to be able to close such a deal, it's crazy. I'm super impressed. That that's possible.

Rutger Lambriex: Yeah. Well, you first have to build that relationship. But the client had done it before with others. And in different ways. So the client was basically very innovative. And we built this together. So yeah, it is true, you need a trusted relationship. But I think if you are open and transparent and basically do justice to the client's needs... And that sounds like a cliché and a container definition, but what I mean by that is, for a general counsel, things are often good enough. It doesn't have to be perfect. And they live with a risk matrix and an efficiency matrix, and they need to keep their internal clients happy.

So as a general counsel, and you have to choose between perfect agreements, delivered upon request one by one, but you know they're 100 percent correct. Or that you can increase speed-to-market with a bit more standardized agreement. If you do the data analysis of risk, you can check in which countries, and with what product, and with what type of agreements actually something went wrong in the past. So you can identify the high-risk agreements. So if 80 percent of your agreements are low risk, you can commoditize and increase speed to market. Then the general counsel's client, which is the business, is gonna be really happy.

Pim Betist: Yep.

Rutger Lambriex: Because speed to market means increase in revenue. And as a law firm, if you have a discussion with the client about how can we improve your performance, then you help them to change from a cost to a value driver. And then suddenly, the in-house legal department is not the department where you knock on the door when something goes wrong. But you knock on the door when you have a new idea and want to improve the business, and you need the involvement of the general counsel and his team. That changes the role of an in-house team completely.

And you see it happening with some companies, where they've got a general counsel and they have got a legal operations manager reporting to the general counsel. But having an independent responsibility about making things more efficient, improving the benefits for the organization as a whole. 

Let's take a step further. If you look at general counsels, legal functions sit on a unique set of data, and that data is hardly reviewed or mined. Well, if you start using the data and use it to improve the performance of the organization, that also changes the role of the general counsel. And law firms have access to data that can help the general counsel do that.

Pim Betist: Right. So open your cards, basically.

Rutger Lambriex: Yeah. Open the little black box and open your cards. And if you look at the finance departments of clients, if you look at the tax department of clients, they are ahead of the legal department in digitalization, in transformation, in the use of data, and automating. They're ahead. So you also see that tax advisors and financial advisors are also ahead of law firms. The services they offer are, for a large extent, already automated services.

Pim Betist: So they can serve as a blueprint?

Rutger Lambriex: To a certain extent, yes.

Pim Betist: I'm gonna ask a really difficult question, and that is, what if you were supposed to, summarize all of this, like on a billboard or a tweet, you know? You only have a few characters, what would you say?

Rutger Lambriex: Pooh. I'm going to back to what I earlier said. Start thinking about, "How am I gonna earn my money five years times and who do I need?"

Pim Betist: Perfect. Very simple. Start with the first step. Thank you Rutger. This has been amazing.

Rutger Lambriex: Oh, thank you!

Pim Betist: It was complicated to navigate the rain and learn so much from you simultaneously, but I think we succeeded.

Rutger Lambriex: Oh, good. I enjoyed it. And you're a good driver, by the way.

Pim Betist: Thank you!