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Q&A: Lachlan McKnight – "Lawyers who are terrified of risk are rarely good lawyers"
In this Q&A, LegalVision Australia chief executive officer Lachlan McKnight explains how the start-up firm has grown from two to 75 staff in five years; why it is so important to take risks in business; and how machine learning represents the firm’s next competitive move.
A lot of new firms, including LegalVision, have emerged in the past few years. How is the market bedding down?
“There are always lawyers launching new law firms, and this isn’t a new development. The key difference we’ve seen over the past few years is the emergence of NewLaw firms, which are structured very differently to traditional firms, and generally try to deliver a different legal experience as well. Many of these NewLaw firms generate quite a lot of buzz when they launch, but don’t necessarily grow beyond a dozen or so lawyers. Scaling a law firm quickly is a huge challenge, and over the coming years we’ll see if any of the NewLaw players manage to achieve this.”
Why has LegalVision been able to keep the momentum going since launching in 2012 while others haven’t?
“Many lawyers – and, indeed, many business people – are quite happy running a profitable small to medium-sized business. That’s not been our approach. We see a huge opportunity to build a market-leading brand in the Australian legal services market. We’ve, therefore, raised three rounds of external capital, and focus on growth rather than profit. We target a 5 per cent month-on-month growth rate, and invest heavily in marketing, technology and our team to achieve this. Not everyone is willing to take this approach to growth.”
You risked a lot in giving up a secure legal job with Norton Rose. Do you have any regrets?
“I left Norton Rose to complete an MBA, with the goal of eventually launching a high-growth start-up. That’s what I’ve done, so I have no regrets at all.”
Apart from Norton Rose, you also worked for financial services company Barclays. Has your experience in major international businesses helped with LegalVision?
“Working in big businesses has helped a great deal with LegalVision. As we’ve grown, we’ve begun acting for larger and larger businesses. Understanding how a large corporation works is critical to delivering appropriate legal solutions to it.”
What are some lessons you learned through that corporate experience?
“The importance of hiring the right people! Hiring someone who is 90 per cent suited for the job isn’t enough – you need to find smart and motivated individuals who understand what you are doing and want to be part of it. It’s not a good idea to settle for anything less than that.”
What else is crucial?
“Lawyers tend to be perfectionists, and that’s obviously critical to the delivery of legal services at LegalVision. But when you are running a business, sometimes you need to make decisions in a vacuum. You’re better off making a decision and learning from any mistakes you might make rather than extensively planning and never actually executing your idea.”
Has that agility suffered as your firm has grown?
“LegalVision is still at a size where we are nimble and responsive – and we’ve hired a lot of great people which means we can rely on our team to implement things quickly.”
You are a lawyer and an entrepreneur, two things which are not always linked. Can the two go together?
“Definitely. The reality is that lawyers who are terrified of risk are rarely good lawyers. A good lawyer understands risk as it’s just one lever that can be pulled on any given transaction. Conversely, the best entrepreneurs have a good understanding of risk – indeed, entrepreneurship is all about taking calibrated risks.”
Tell us about your management approach?
“Hiring people based on attitude and intelligence is much more important than previous experience in a particular job. From a hiring perspective, the key is to test whether people can do the job well, how they will fit into the organisation and whether they believe in what we’re doing. My management style is very open – I send a weekly email to the whole firm updating our team on revenue, hiring, our successes and client feedback. Being transparent with communication and sharing wins with everyone in the business is important.”
Does that testing involve psychometrics?
“No. We ask candidates to complete a set of exercises depending on the team they are applying to join. If we’re hiring someone for a role in our client-care team, we use mock interviews to test how they’ll speak to our clients on the phone. If it’s to join our marketing team, we have exercises around running a Google AdWords campaign, editing a very technical legal article and so forth. In our view that’s a more realistic assessment of someone’s capabilities than psychometric testing.”
Many law firms talk about innovation, but struggle to really innovate. In your view, why is that?
“The reason firms struggle to innovate is that they are focused on short-term returns rather than long-term growth. The partnership structure doesn’t encourage innovation. Partners regularly leave law firms. Given this reality, it doesn’t make sense for them to invest in building technology that will only generate a pay-off a few years down the track.”
How is your firm ensuring it is innovative?
“Our core business goal is to grow at 5 per cent month on month. This ensures we have no choice but to be innovative. We certainly have a very different approach to marketing and business development than traditional firms, and our approach to technology is also very different. Rather than just deploying technology that external tech legal providers have built, we’ve built our own tech stack. This is a huge advantage when working with large corporate clients – we can customise our tech to the needs of our in-house legal team clients.”
What opportunities do you see in the market for LegalVision, in particular?
“The firm has spent a lot of development time, effort and resources on our machine-learning capabilities. As well as delivering legal services, we build technology to deploy to our large enterprise clients and help their in-house legal teams. We’re launching a machine-learning tool that will help us to further bring down the cost of reviewing certain types of documents. We know these developments will be a threat to traditional revenue streams for law firms in the next couple of years. We’re also continuing to attract lawyers from top-tier firms, so there’s real opportunity around hiring quality team members.”
Many firms have viewed machine learning as a potential threat some time down the track, but it seems that you think the disruption is a real factor right now. Is that correct?
“Yes, at the moment, machine-learning tools are not as accurate as a lawyer reviewing a document, but the technology is moving along quickly. For simpler enquiries – for instance, checking the expiry date of a contract – machine learning can already help reduce costs. Thousands of documents can be reviewed in minutes. More complex legal work will in all likelihood still need to be completed by lawyers for many years, but lawyers who use machine learning where appropriate will be able to provide quicker turnarounds and more cost-effective pricing to clients across the value chain.”