In this episode, Seth and Jay talk firm culture and the future of tech and law with Clio founder and CEO Jack Newton!
Hello, hello and welcome again to another edition the Thursday, July 30. edition of the Maximum Growth Live Show. Jay Ruane here. Seth Price here Seth How you doing this week?
Doing great doing great.
Boy it’s a hot one this week, huh?
It is it’s a scorcher just trying to stay cool.
Yeah, it’s really been crazy. You know, with it being so hot. You almost can’t even go outside. We had a we had a little league game the other day. And it just was just drenched after three innings with no, you know, we can’t even use the dugouts because of Coronavirus. So it’s like you got everyone’s sitting there with with with umbrellas. We’ve told the kids to bring umbrellas, but it doesn’t really help me pitching out there on the mound I’m roasting. And you know, I don’t get tan I get red like a lobster. So it’s not really the best. But I wanted to talk a little bit about what we have this week. We’ve got another phenomenal guests coming up last week, you know, talking to Mark that was just a phenomenal show lot of nuggets there. We got a lot of great feedback. And you know, one of the things that people can do if they haven’t watched it live, they can subscribe to our podcast. Our podcast is also available as part of the maximum law podcast. So if you’re a subscriber to that, you’ll get our episodes coming up in that feed as well. Maximum has got a great episode this coming week with Michel de lino who’s a family lawyer in Seattle, Washington, and it’s great for them to be talking to a family lawyer at this time because, you know, the family law practice has really changed a lot with Coronavirus. So I’m curious to see what what comes out of that episode. But Seth tell us a little bit about who our guest is today. So we can we can get ready for that.
We have Jack Newton, founder of Clio and clear, you know, monster in the, you know, lawyer case management space, it’s crazy what they have done and how they’ve dominated a space, raised money, scaled, and can’t wait to sort of talk to him about what he’s done and how he’s gotten from A to B. And similar to Mark, you know, these guys look inside all these law firms and see what what takeaways they can give us reflecting back looking at our work.
Yeah, it’s really sort of interesting to me, because, you know, one of the great things and I think I’d like to talk to him a little bit about this is that, you know, Coronavirus, did hit law firms hard, but it’s really the small firm and the solo lawyer that’s using technology to deliver their products that was able to be nimble, you know, it’s sort of like those big firms, it takes a lot to move a battleship, it takes a lot less to move a raft, right. And so that raft is able to get places that the battleship can’t get. And, and we’re seeing that we’re seeing a lot of smaller law firms, able to really sort of iterate scale, change things up, where we’re starting to see, at least in my market, I don’t know about yours, we’re starting to see the fractures and the fissures on the bigger firms. I’m starting to see larger firms, you know, split up, you know, try to change their focus, I don’t know what’s, what do you see in your market? Are you starting to see some people start to break off and split up this, you know, five and a half months in?
You know, it’s all over the place. And I think some of it, you don’t, we’re not networking the way we were before. So I really don’t have that much of a finger on the pulse, I get the impression that most firms present company included, have looked internally as to see what is not profitable. And especially once you go virtual, there’s a lot it’s much clearer. You know, when everybody’s in this big mixing bowl, and there’s the synergies in an office, you’re sort of like, oh, okay, well, this one isn’t doing as well. But when you start to look at the silos individually, as people moved out, it became readily apparent where some of those weak links were. And I would I see big firms to small firms that people have looked and said, Okay, if there’s ever a time for us not to continue carrying people, this is it. And that’s what I’m seeing sort of crowdsourcing friends and neighbors because DC has a lot of larger firms, but it’s similar. Like if you can’t carry your own weight, this is not a good time to expect a firm to be carrying you.
Yeah, I think that’s going to be a real problem. And I think it’s going to have some major changes in the market going forward. And some of those bigger firm lawyers will try to eat away market share from the small firms and the solo shops, because you know, they’ll go out and they’ll hang a shingle or or try to figure something out and, and as our listeners know, as you and I certainly know, it’s hard to make a buck, it’s hard to get the phones to ring it’s hard to close a client. Everyone sort of, you know, doesn’t see how the sausage is made, as they say, if it’s two of us who have been in this, you know, making the phone’s ringing, getting people to retain, that is such an art. And you know, you see it when that lawyer leaves the U.S. Attorney’s Office joins a big, firm, and two years later, they’re out, because they never, they never knew how to generate any business. I think that you’re gonna see that happening a lot with some larger firms and even some midsize firms, as they sort of get leaner, and people aren’t necessarily able to be carried, you’re gonna see some people sort of struggling with a new normal, because it’s not like they’re walking back into a booming legal economy. Now, it’s really, you know, people are fighting over scraps in some respects.
So I feel like it’s 2008 all over again. And, you know, what’s, what’s ironic and great, great to have Jack coming on board in a moment is that, you know, we all, you know, ran for the hinterlands, right, we left the office or home. And I remember just a few years ago, when we moved our non-plaintiff side of the practice to Clio, you know, there was a decision to be made a lot of their competitors were not cloud-based, or not fully cloud based. And, you know, he’s looking like a pretty smart guy right now, having coordinated this, this operation that’s allowed people to just go anywhere and continue to operate. So I can’t wait to get his thoughts on what’s happening now. What’s going to happen next?
Yeah, I know, it’s funny, I was talking to our phone guy, because we, I think we share the same phone people. And I said, you know, you guys must have been slammed when this thing first happened. And he laughed. He said, Yeah, you guys were the easy people. He’s like, I sent you a couple of handsets, and you’re good to go. He’s like, but we were taking legacy systems that had been in place for 50 years, 30 years and trying to get people to be able to work remotely. And I think that’s one of the great things about, you know, the people in this community, our viewers, the people in the maximum lawyer community, you know, we’re quick to adopt technology. And I think going to the cloud is something that, you know, Jack was pressured about, and I think I wish to bring him in now. And we could talk a little bit about that and where he sees, you know, the future of Lago and what do you say? All right. Let’s bring him in in 3.. 2.. 1.
Jack, it is great to have you here. So excited to hear everything going on in your world. In one sense. We look at you as the smartest guy in the room in the sense that you took us all into the cloud years ago. So when the pandemic hit for many of us, it was a pretty smooth transition. For a guy who is employing all these people to help lawyers work from the cloud, talk to us about what’s been going on in your world.
Yeah, well, it’s been a wild four months, that’s for sure. We’ve seen what I’ve described as a mass migration to the cloud happening in the the legal sphere where firms like yours, Seth, that were ahead of the curve, and you know, on cloud based platform like Clio before the pandemic hit, you’ve commented to me in the past few, you hardly missed a beat. It was just a very smooth transition. But we saw COVID-19, obviously, as a huge catalyst for many law firms and a forcing factor to finally make this move that they’ve maybe been punting on for years. And we’ve seen the busiest quarter in Clio’s history in terms of boarding new customers, we’ve been running a very systematic migration to the cloud program for new customers where we’re teaching them the ropes, not just of Clio, but of what we view as four or five really core tools for the cloud-based law firm. So this is obviously a cloud-based practice management and cloud-based client portals that tools like Clio provide, where you can interact with your clients online, you can intake them online through a platform like Clio Grow, but there’s also a whole constellation of software, you need to run a cloud based law firm. You need an E signature solution, you need a video conferencing solution, you need an internal communication tool like Slack or Microsoft Teams, you might need a cloud based telephony platform like Dialpad. So, we’ve been really helping customers understand not just Clio, but this broader suite of cloud based tools that they need to run a successful cloud based law firm. And it’s been honestly really pretty exciting seeing how many firms have leaned into technology in a really aggressive way in the last the last few months that again, we’ve seen what I would regard as a decade or more of digital transformation and technology transformation happen in legal just in the course of four or five months.
That’s awesome and look obviously appreciate it. You know, our podcast here focuses on growth. And you guys when I met you, you were one of many players in the in the space and you’ve really excelled. You’ve raised money, you’ve scaled. Can you walk us through, you know, some of the things that you focused on as you know growing Clio to what it is today. I mean, the onboarding of people, creating of systems, J speaks a lot on systems. What are the things that you’ve seen that have been responsible for you guys getting to the stage that you’re at, sort of leaving a lot of your competitors behind?
I’d credited to a couple of things that I think when we look at the the evolution of Clio, and maybe for some of your listeners that aren’t super familiar with Clio, we started way back in 2008, launched as the first cloud-based practice management platform back when you’d spent the first five minutes of introducing cloud-based practice management explaining what the cloud was, as you pointed out, you know, this is a, we’ve been in this game for a long time. And over the course of the last, the last 12 years, we’ve scaled to being the most widely used practice management platform in the world and in history, bigger than any of the on-premise incumbents were back in their heyday. We’ve got over 150,000 legal professionals that depend on Clio every single day. Clio itself is a company of over 500 people now. And we’ve we’ve raised over the course of our history, almost $300 million of funding to build the platform that is Clio and last year, announced our biggest funding round our series D-funding round, which was a $250 million, series-D led by TCV and GMI equity. And these are investors that are behind companies like Airbnb and Peloton and Netflix. So really exciting to have, that kind of investor and that financial backing to take Clio to the to the next level. And in terms of our growth path, I would really credit our success to, to a couple of things. And I really think it boils down to being relentless on these two factors. One is focusing on the customer being customer centric and listening to your customer. And in fact, I, as you notice, I’ve recently wrote a book called the client-centered law firm, basically taking these customer centric ideas from the product in the startup world and applying them to law firms. And we can, we can talk about that in a few minutes as well in terms of how you can take some of those lessons to to a law firm, but I really think we listened intently to what our law firm customers wanted. Just as a bit of context, by the way, I’m not a lawyer, I’m trained in computer science, got a master’s degree in machine learning, I really did not know anything about the legal industry. When we started building Clio, I was a technologist and I saw this cloud wave of technology transformation as being one of the most important ways of technology transformation in history and saw it as a unique opportunity to transform an industry and ended up identifying legal as, as an industry that was ripe for that transformation. But through the course of building empathy for my customers, building solutions for them, and listening to them in terms of how they’re able to deploy them. That’s really at the heart of what took Clio to, to its success from a product perspective. From a Marc Andreessen, just before I leave that topic, talks about this concept of product market fit and this idea that you need to be continually iterating on your product in order to continually improve its fit with a markets needs. And that’s exactly what that customer centricity approach will deliver to you is a product that ends up addressing the needs of your market all that better and improving the overlap of that, that Venn diagram between your product and the market needs. The second thing I would credit Clio success with is, is our internal culture, just the culture that we’ve built over the course of the last five years or 12 years rather, that’s allowed us to scale to 500 people. And culture eats strategy for breakfast is one of the Peter Drucker quotes I’m a huge fan of, and you can have the best strategy in the world, you can have plans for how you’re going to win the cloud-based practice management phase and, and really, if you don’t have a culture that will enable your company to pursue that strategy and execute on that strategy, if you don’t have a culture, you alluded to some of these these issues as well. If you don’t have a culture that embraces the idea of developing employees of helping them do the best work of their careers, you’re gonna fail. So culture is absolutely key. We talked about a culture at Clio or above being high performance, but human and we encapsulate that in a saying, which is, we’re a human and high performing organization, meaning that we think we can coach and develop our employees, we can give them feedback, we can help them become better people. And we can also place really high demands on them, our expectations of high performance are absolute. We don’t tolerate underperformers. And very much as as Reed Hastings talks about in the Netflix culture deck, if you’re not a fit for the culture, if you’re not performing at the level, you need to, we don’t hesitate about giving somebody a nice package to exit the organization, but we know that to maintain that high performing culture, people need to be surrounded by peers that are also high performing. And I’m a huge believer in the idea that one bad apple spoils the bunch. If you have one underperforming, if you have one person who’s cynical or not signed up for the mission, they can really have a much larger negative impact than I think many people realize. So culture is absolutely integral. And what I would say to conclude that thought is a strong mission. And a mission that people really attached to and believing is a really important aspect of building that that culture and building that environment of high performance. We talk about at Clio, actually, our mission being to transform the practice of law for good, with with that deliberate double meaning of wanting to have a positive impact on law to make lawyers happier, to make clients happier. And for this to be our permanent dent in the universe as well. And it’s one of the ways By the way, that mission is one of the ways we’re able to attract employees from companies like Google and Shopify and Amazon, and Facebook, where people resonate deeply with our mission and join Clio, because they want to have an impact on a really important industry.
You know, we’re going to pivot into exactly what you’re talking about, which is looking inside of law firms, and maybe lessons you’ve seen that are applicable for them. But you said something that I love, that Jay and I have talked about, and that we hear a lot with the Maxwell community, which is, you know, one bad apple, obviously, you want to get rid of that poison, we talk about it. But there’s a reality, when you’re running a business, you’re trying to get stuff done. The idea of letting somebody remain until you get somebody new, versus having the wherewithal to allow something not to get done for a period of time. Now, you’ve scaled up a lot of people, but through over the years, you’ve probably had those decisions to make. This is something I struggle with myself, you know where your weakest links are, and figuring out how quickly to get them out versus a smoother transition where you would have time to hire it on board and have that easy replacement. How have you dealt with that at Clio?
Yeah, my as painful as it is, Seth, my approach has always been, you’ve got to tear that band aid off, because the bad apple, this is truly and I would maybe, you know, provide a little bit of context here in that I think there’s there’s some nuance that’s important, a bad apple, that I would view as somebody that’s having an active negative impact on the organization in some way. Despite the fact that they might be a hard worker, they might be your best sales guy. You know, they might have a really high impact role in the company. But if they are, have, if they’re toxic, you need to get rid of them right away. Because the that invisible damage that they’re doing below the waterline to culture and morale is, is it’s just too high a price to pay no matter what the upside of that employee is. So I think as soon as you identify them as a bad apple, you, you need to make that quick move to get them out. Because what’s not obvious to you is that they’re they’re having that negative impact below the waterline and they’re dragging everyone’s else performance down. If you’re just dealing with a typical kind of underperformer, there’s lots of room I think for coaching and leveling them up and giving them giving them some some chances to improve being really, really clear about the fact they’re not meeting expectations and providing some support for them raising their game to get to those expectations. So I really think that those are two very distinct approaches and in the ladder, you do have some room and some time and I think owe it to your employee to do your very best to to coach them up or coach them out. And and in the former case that bad apples scenario, you just need to get rid of them. There’s a fantastic This American Life podcast. I don’t know if you’ve talked about this in your group. It’s a podcast from I would say five or six years ago, talking about bad apples and it actually talks about some sociological research that that examines the impact of bad apples and what is so interesting about this podcast in the body of research that it references is the the typical notion that, or the widely held notion rather, that a high performing team will kind of rise above the impact of a single bad apple is actually not the case. This study looked at the impact of a bad apple on an otherwise and previously high performing team, and found that in reality, the impact of bad apples is actually the opposite of what we intuitively think. And the performance of the team actually averages and trends down to the bad apples level of performance rather than the inverse. So just just think about that one bad apple truly spoils the bunch and drags down your entire high performing team down to their level. And interestingly, they also talked about almost an ontology for what kinds of bad apples you can have. So if I remember correctly, it’s been a little while since I listened to this podcast. But there’s three types of bad apples, there’s the slacker who just won’t contribute to the, to the, to the project or to the team. There’s the depressive pessimist, who just walks around moping, talking about how we’re never going to succeed at this crazy, audacious idea that the boss has and is basically just cynical. And then I think there was what they just described as the, the asshole, somebody who is maybe a high performer, that that is just rubbing everyone the wrong way. And you know, again, the performance of the whole team gets dragged down by that jerk, actually, they had a more delicate term for the for this individual. But if you have one of those three types of bad apples on your team, you need to you need to exise them, you need to look at them as a cancer that is going to spread in your team if you don’t get rid of them. So great episode of This American Life that I’d highly recommend your listeners.
Check it out. I’m going to take that analogy one step further. Because something I’ve dealt with, had bad apples, probably in all those different categories over time. Some of them are easier if you can just extract it and it’s done. Sometimes you have sort of other cancerous cells that they’ve touched. That’s right, you deal with disorder, because at some point, you realize it’s there. It’s not usually day one. And now you see people that had been infected, do you usually find that by pulling the bad apple out you’re good? And obviously, you put some focus on those people? Or do you have to sort of cut further around in order to make sure there’s nothing? There’s no cancer cells left, you know, how do you deal with that piece?
My personal experience is, is that usually getting rid of that one bad apple is actually the the key thing and and the people that they were negatively influencing will just bounce back to a better state being surrounded by people that have a more positive attitude or more engaging. And there may be people that are just more easily influenced by those that are around them. And if you just make sure that those that are around them are positive net contributors to the to the mission, you’ll you’ll see that positive response. So my experience has been if you get rid of that one bad apple, you don’t need to worry too much about you know, excising anyone they may have touched, so to speak. But I think you want to be eyes wide open and keeping your ear pretty close to the ground, after you’ve removed what you think is the bad apple, because there might be more than one.
Great. Well, before it turned to J. You know, you talk about the client centric law firm. You know, one of the things I always ask people we had Mark Britton on last week, was you you have the benefit of seeing with you and your team inside of hundreds, if not 1000s, of law firms. And what are some of the things that you can give us as takeaways, what are you seeing that the great firms that are building and growing are doing the right, and what are the some of the things that you may see that you see as red flags where you end up seeing problems within those firms?
Yeah, great question. And I, I do view the the position that, that I’m in at Clio as being a really fortunate one, where we get to be almost like a McKinsey or a Boston Consulting Group of law firms where we get to see 1000s and 1000s of law firms and get to get, you know, on the insides of the best run law firms in the world. And I would say that some of the common traits of the highest performing law firms are exactly what I encapsulated in my book, actually, this idea of being client-centered, when I look looked at the themes of it, it manifests itself in so many different ways in terms of the specific strategies and specific approaches, you see taken up these law firms. But at the end of the day, when you look at the thinking and the motivation that’s driving their strategy, it’s being client-centered. And it’s really this idea that my law firm is here to solve people’s problems. I’m not here to advertise or to market what an amazing lawyer I am or what my GPA was in law school or who I clerked, under. I’m here to solve people’s problems. I think the law firms that have have even a basic awareness of business and sales and marketing have a huge edge. When we look at law firm responsiveness in Clio’s Legal Trends report last year, we saw some pretty devastating data that showed, for example, that over half of law firms that we contacted and what we did is we essentially did a secret shopping. Or we hired a research firm to call law firms, to email law firms, and in that process to look as much as possible, like a legit lead. And we wanted to see how responsive law firms were, on average to that lead. And as I was mentioning, the data is pretty devastating. The over half of the law firms that we contacted by phone, didn’t pick up the phone at all. Of the firms we left voicemails with, over half of them took longer than 72 hours to get back to us. Of the of the firms we emailed, and we emailed over 1000 law firms, again, over half of the law firms never responded to us at all. And many of the law firms took longer than 72 hours. Of the ones that did respond to us, the majority of them took longer than 72 hours to respond to us. So if you just have the, again, a basic system in place to manage your leads effectively, to be responsive to those leads, you will have an incredible edge in the marketplace. Because again, if you know consumer behavior, and you understand consumer behavior, and again, I think that’s a common trait I’ve seen in many of the best run law firms I’ve seen, they know that the first one to respond is has got an unreasonably high probability of winning that client overall. And when in fact, when we surveyed consumers and asked them what do they prioritize most? What do they value most in the law firm, that they’re ultimately going to select? Responsiveness is right at the top of the list. It is not whether you graduated magna cum laude at your law school it is do you get back to me quickly? Do you text message me if I if I need to get a hold of you quickly? Do you pick up the phone? Or do you at least call back quickly when I contact you. So I think law firms that understand the dynamics of business, understand a sales cycle view their law firms as at least partially being a business. And again, there’s some law firms that really almost take a fancy idea that they’re their business. But you need to look at your law firm as a business. And you need to look at as a business that you need to run well, that needs to be responsive to consumer needs, and, and invest in the infrastructure to make that happen. And maybe that’s the third and final kind of common trait I see across these firms as well as they invest in the people and the technology and the tools to fulfill that customer centricity and to fulfill that business mandate that they want from their from their law firms. So So again, the typical lawyer might might listen to this and say, Well, I have a hard time picking up the phone because I’m always in court. And then I end up getting busy in the evenings catching up on my caseload. And yeah, it can easily be two or three days. Before I get back to a client. You need to think about how do you extricate yourself from being in the critical path there? How do you hire, for example, a call answering service? There’s there’s law firms that have entire teams of people that are just dedicated on intake. And again, they’ve got SLAs, you guys are great examples, right? They’ve got SLAs that they adhere to a service level agreements where you know, the phone doesn’t ring more than twice. If there’s a callback that needs to be made. It’s done within so many minutes. You know, and again, this mentality that the way some law firms might look at acceptable response times being in hours or even days, I think the best law firms are thinking about how am I responsive in minutes or even seconds, bringing tools like online chat to their websites, bringing automated intake tools, to their systems, hiring people where it makes sense to be as responsive as possible. And, ultimately, again, a really important philosophy here is the lawyer in the law firm is focused on the highest and best use of their time, and hiring people to surround them to help them execute on other aspects of their business.
That’s great stuff I know, we live in, you know, one of our mentors, says that we’re really a plumbing service and that you have to, you know, envision the hot water heater in the basement exploding and one significant other is yelling at the other, and can you can you answer and solve their question, Jay? Throw it to you.
Yeah. So Jack, thanks for coming on. You know, you talked a little earlier in the program about culture and how important culture is, and one of the things I think, for our listeners and our viewers, is that they are in a period of growth. And you at Clio have had tremendous growth. And the culture of your company, I’m sure, has changed somewhat from when it was 10 people to 100 people to now 500. Can you talk to, a little, to our people a little bit about that, and how you maintain the important parts of the culture, even though you know, what got you to this point isn’t what’s gonna get you to the next level, I’m sure you’re envisioning a point when you’re going to be at 1,000 people, and your culture is going to have to change, you know, when it’s a small law firm that starting out, and it’s two friends from law school, maybe they’re, you know, maybe they’re single, they don’t have kids, culture can be one thing. But then when you hire, and you add people with different family obligations, cultures have a tendency to change. So talk a little bit about how your culture has changed, and how you guys have been able to adapt it. So our viewers can understand that culture is sort of dynamic to some extent.
Yeah, I think that’s a really important point, Culture is dynamic. And I hear many people talk about culture, in terms of how do we preserve our culture. And I think that’s actually almost a really dangerous way of framing how you want to approach your culture, if you’re talking about preserving your culture, it does imply that it’s, it’s static. And I think you really need to lean into this idea that your culture is going to evolve and change significantly over time. And the way I like to think about it is you want to look at it as an evolutionary process. You know, with every new employee that you bring on, with every new team member, you bring on, think about it as you’re almost hybridizing their DNA with your existing company DNA, and you need to be really deliberate in terms of the people you’re bringing on board, and whether they they resonate with your existing culture, but also, are they a cultural add? And I think this is an important concept where you hear a lot of companies talk about culture fit in the interview process, are you a culture fit? And again, the existing team members often do kind of a panel interview. This is how it works in the startup world, at least quite quite a bit. And maybe law firms as well, where you have somebody interviewing the candidate to assess just culture, and are they a culture fit. But I think the danger there is you’re actually hiring, hiring for commodity and if you’re hiring for culture fit, you end up, I think, this is one of the reasons you have such a problem with bro culture. For example, in Silicon Valley, you end up having culture fit, essentially being, you know, one brogrammer, assessing another brogrammer saying, oh, this guy is just like me, perfect, let’s hire him. And you end up with a very and un-diverse very un-inclusive environment for employees. What you want to look for, instead, I believe, is culture adds, you know? Does this person bring something to the table that is creative and additive to our organization, and might even challenge some of our existing cultural norms in a useful way. And if you’re really deliberate about your hiring, and thinking about, especially at the leadership level, when you’re bringing on new leaders and people that can really influence the organization, I think if you’re really deliberate about that, you can see really, really positive impacts in terms of how you’re evolving your organizational DNA. And I’ll give you an example of how this looked at. At Clio back in our early days, around 2012 or so, we were hiring our first VP of sales. And I would characterize Clio at that point, as being a very, very product driven company that didn’t understand sales at all, you know, we didn’t you know, we were as bad as some of the law firms, I was just condemning in terms of, you know, not phoning leads back, we just kind of, we had a free trial, and if you found Clio, signed up for the free trial and converted, you know, great, but we didn’t do a lot other than that to try to sign you up or to convert you. And our first VP of sales was somebody we hired out of Salesforce, he was previously an RVP, at Salesforce and in the hiring process, we thought, you know, this is going to be challenging for the organization, because Steven, was his name, Steven is going to bring a whole new set of DNA to the company. And he’s going to bring some sales methodologies and an approach to growing the company that’s going to challenge Clio, but we viewed that as a very positive, evolutionary step that was actually necessary for us to succeed and the way we wanted to over over time. So we brought someone on board with this very kind-of, deliberate approach, saying “There’s going to be some ups and downs in this journey with Stephen, but he’s going to challenge us in some really unique ways to become a more sales driven organization, not instead of being a product driven organization, by the way, but layering that on top, and again, kind of hybridizing that approach with our existing culture”. And sure enough, you know, coming out of four years of Stephen leading our sales team and being an executive at the company, Clio has really gone through an important inflection point to being the kind of category leader it is today. And I think you need to be very deliberate about the hiring, especially of leaders, to bring on that culture add to the team. The second thing I’ll comment about evolving culture and maintaining culture, or at least maintaining the core elements of your culture over time, is being really clear about what your values are. So again, it was, you know, a few years into Clios initial growth journey where we felt, you know, hey, we’ve grown from two people to now about 50 people. And we feel like we’ve got something really magical in the culture here, there’s something special that everyone comments they haven’t seen in any of the other companies they’ve worked at, let’s try to write down and encode what these values of our culture are. And we went down and, you know, basically crowdsourced these in a pretty like, grassroots way, and encoded what we felt were Clios core values at that point in time, and we ended up with seven core values out of that exercise, and we still have those seven core values today. Some of them have evolved and changed slightly over time, but what I think is important about having some core values that you can write down and share with with potential new team members is, I view your values as being like the rules of a sport, almost. And in hiring a new employee, you need to say, here’s the rules we play by, like this is how we measure winning and losing, and by the way, if you don’t sign up for this set of values, and they don’t resonate with you, this probably isn’t going to work out and just being really deliberate about that, and being clear with people that if these don’t resonate strongly with you, you know, keep the job search going, like we’re, maybe, not the right place for you. And that provides a very clear … we make it part of our interview process. It’s part of the scorecard for every employee we interview, is this assessment of how well they line up with our values and how much they they appear to even live our values through their own professional experience in their own personal experience.
You know, it’s something that we strive for, we talk a lot about within Max Growth and within the Maxwell community. Values, what a lot of us have struggled with, everybody being remote, you know, you try to sort of scale visiting employees, social distancing, and doing happy hours zooms. Have you found anything at scale that you’ve been found useful for trying to reinforce, you know, values post-hire, how do you keep that culture sort of afloat when you can’t touch people the way you did before?
Yeah, it’s number one, hard, I think especially, you know, with everyone being remote, I think one of the ways your culture gets reinforced is people osmotically in all of those kind of happenstance run-ins in the office, and observing behavior in a meeting, and so on, that’s gone away, at least to an extent in this, this Zoom world that we’re all we’re all trapped in, at least for the time being. So I’ll acknowledge, number one, that it’s very hard, and harder than then being in person, but also gives us an opportunity to be a little bit more deliberate about it. I think one of the one of the things that’s really important about culture and values is making them part of your everyday language and your everyday discourse. So reference back to them all the time and reference back to them in terms of how you make decisions. I think that values that are actually additive and valuable in an organization are values that help you make decisions. Values should be opinionated in the sense that they shouldn’t be almost these tautological values that you see in some organizations like, act with integrity. Okay, great. You know, that’s kind of a good basic human property to have. But does it help you make hard decisions? It doesn’t. I think good values, and I’ll give you an example of one of Clio’s values: Our first value is customer success comes first. So we prioritize our customers success over anything else. So when we’re lining up certain decisions, even you know, when COVID hit and we launched a million-dollar relief fund for our customers, and really put a ton of company resources around helping, not just our customers, but the entire industry, navigate this crisis, that value was our North Star and helped us make some very tough decisions over the course of the last the last four months. So you need to make them part of your everyday discourse, you need to talk about them, you can’t just have them up on the wall somewhere, especially when nobody can see that wall admist the pandemic, you need to make them part of your everyday language and reference them, you know, as leaders, as one of the ways you’re making decisions. And to me, that is actually, as I mentioned, one of the almost, quality assurance checks you can make of your values is “Can I easily weave these into my everyday conversations with employees, to help them understand how I make decisions” because ultimately, again, the value of a good set of values can be that your employees, without you in the room, can start making better decisions, using those values as a Northstar for the everyday decisions they’re making on the ground. And if you if you succeed at doing that, you’ll have a massive win, because all of a sudden, you’re taken out of those decisions, you can start operating a bit more strategically.
I think the frankly, the great takeaway here is use your values as a Northstar, and let your let your employees guide themselves with that. That’s right. I mean, that’s really, that’s really something that I think a lot of people need to sort of hold on to and make sure that you define it because without defining those values, it really doesn’t allow them to get an idea of where they’re going, and that’s a great message.
You really need to write them down. They need to be, you know, written down and documented. So even if you feel like there’s an implicit set of values in your firm, as I’m sure every firm feels, there isn’t. Go through the work of going through an exercise, there’s facilitators you can hire to help you do this that are amazing. You can assign a facilitator within your company, if you’ve got somebody that’s good at that kind of thing, and interview and talk to your employees and figure out what your values are. Maybe my final comment on values, is they can be a combination, I believe, of both a reflection of what is your values and what your values are at a given point in time. But also what your aspirational state is, you know, I think you should have values that might be a stretch, you know, something that you feel like “This isn’t necessarily where we are today, but this is where we want to be in the future” and use that, again, as a North Star to kind of guide where your organization will evolve to.
You know, what, this is great stuff. And I think stuff that, you know, lawyers with our group are constantly focused on. I love the Northstar concept. Let me bring you back to granular in looking at the law firms themselves. This is all amazing, and clearly this is a filter, but you’ve hired more than 500 people in the last several years. What are some of the lessons learned from that? We see a lot of people within our group, you know, I hired this person, was a great interview, and it turned out not to be the person who could perform substantively once they got there. What are some of the mistakes you’ve seen internally? And how, you know, what are some of the things that we should be looking at, in building our organizations to try to avoid mistakes. Understanding that you’ve created this, this awesome filter, but when it comes to brass tacks of substance, where do you, what have you put in place to try to make that as effective as possible?
Yeah, so number one, hiring is is hard. I don’t have any silver bullets here. Even having gone through the experience of hiring hundreds and hundreds of people at Clio. I think, a few other realities you need to be aware of is that people can interview really, really well, and then completely bomb on the job just as you were alluding to, Seth. So I think this is one of the realities that you can never escape, is if you’re ultimately trying to assess somebody’s ability to perform a clock complex job over a long period of time, over the course of you know, maybe two or three hours of interviewing a person. And that’s, that’s just super, super tough. And depending on the kind of role, you know, for developers, for example, we put them through a whiteboarding exercise. We have a coding exercise, we have a pure programming exercise. So you can measure those core competencies, but assessing how they integrate into your team and so on is is very hard. So I think one unavoidable part of hiring is being psychologically ready for the firing part if they don’t work out, because that will, no matter how great your interview process is, no matter how great your intuition is, in terms of whether they’re a culture ad or are not, you’re gonna get it wrong sometimes. And I think almost every manager you talk to, when you talk about whether they made the right choice in terminating somebody, the feedback you always get is, “I waited too long to terminate them, you know?” is, “I paid too high price either on the culture side or on the Team Impact side or the performance side” “I waited too long”. So maybe we’ll get started out, kind of the ugly part of hiring, which is the inevitable, almost corollary, that you need to fire people, and you need to be able to do it quickly and humanely. I think, one of the concepts, I talked about this a little bit earlier, this concept that Reed Hastings talks about in Netflix, I think is really powerful, in ideas is this idea that, you know, we’re not a family. And there’s a lot of companies that talk about being one big family. And I think that’s actually a bit of a dangerous metaphor. And it’s exactly what Reed Hastings points out, he says, “We’re playing a team sport here. We’re playing a competitive sport, and I owe it to the rest of the team to have the best players in every role. And we will hire and cut aggressively to make sure we’ve always got the best people in the right role”. So you’ve got to take that mentality with hiring and firing and then just take the approach that you owe it to your team to have the highest performance in every role. And then one of the ways that they solve, what is a huge psychological handicap for many people, is just how hard it is to fire people, Reed takes the approach of saying, “Give people a really generous severance package, and just say, we got it wrong, you know, you’ve made a good contribution to the team, maybe we’ve scaled beyond your capabilities, or maybe we haven’t got the hiring process wrong. We’re going to put you in a situation where you land on both feet, and you’re going to have plenty of time to go find your next gig”. And it can help take a lot of the discomfort around the firing process, out of the equation. So with firing out of the way, let’s talk about getting hiring right. And it is hard. But here’s a few of my key learnings over the years. Number one, reference check. Reference check like crazy. I think if you do reference checking properly, you can almost skip the interview. And by the way, reference checking properly means doing it almost exclusively through backdoor backchannel references, you do not ask the candidate for the list of references that they’ve pre-vetted and given the scope in terms of what they should say when you reference check them. Go find four or five people that have worked with them in the past. And this, this can be a lot of work, by the way, but it will pay dividends 1,000 times over. Go talk to a former boss, go talk to a former colleague, ask about the things that are important to you in terms of what you view as the successful attributes of of somebody. Ask them if they would hire that person again, ask them if they’re in the top 5% or top 10% of people that they’ve ever worked with. And if the questions to those questions are not emphatic yes’, if they would, if they have any caveats, if they couch their response, in a way that is anything less than unilaterally effusive, walk away. And I think that is, and I’m shocked, by the way, how poorly referencing is done in almost every company I see. I see people that I wouldn’t touch with a 10-foot pole that have left Clio that we’ve terminated, get a new job, sometimes a more senior job at another company, and nobody at that company has bothered to do a single reference call into Clio to see what kind of person there they’re hiring. I am truly baffled at how poor referencing is. And it is work. But you can avoid, I would say, 90-plus percent of the hires that go bad if you do a good job of referencing. So that’s maybe my number one tip and I think it’s a universal tip that can work from anywhere, from the individual contributor level up to your most senior leaders.
Jay, I’ll give you the last question, but I had a final one, which is something that I’ve struggled with is, I couldn’t agree more about backchannel references. When you can get them, amazing. What is your take on recent graduates? You get a value for people coming out and energy, but it’s a lot harder to screen some of those things because you don’t have the past performance. What’s your feeling on getting somebody’s second or third job out versus right out of school?
Yeah, I think, that’s a great question, and I think one of the realities of fast growing organizations, and we have certainly dealt with this at Clio, is a reality is that you can’t always hire the seasoned, perfect person for the job. You’ve often got to hire somebody that’s a bit more junior than you might like in an ideal world, and then have to be really deliberate about coaching and developing them into that role. So, we’ve had huge success with this, of hiring recent grads, people right out of school, and of course, you know, you’ve got almost nothing to work with when it comes to backchannel references, and so on. In those kinds of situations, so you’ve got to go more off of the, the hustle, you know, do they have spunk, are they competitive, are they in team sports, are they academic achievers? These are a few of the things I would look for: is the DNA you’re looking for coming out of a recent grad, are they passionate about stuff, do they have a hobby? You know, what are some of the things that you think might make for an interesting high impact hire. Is there intellectual curiosity is another thing I look for, are they good learners? And then if they’re good learners, and I think that’s ultimately what you’re looking for, if they’re good learners and they’re team players, you can really have a situation where they can onboard your company and really shine, and some of our highest impact employees are people that were fresh out of school. In fact, my Chief Operating Officer at Clio today, Georgia Harris, we hired back in the early days of Clio. A fresh MBA grad, you know, really not much in the way of references or anything else, but a guy that was smart as hell that was hard worker and ambitious, and would just move mountains to help Clio succeed. And he’s moved all the way from a junior business development role all the way to being my right hand man today. But over the course of that new grads career trajectory, I do think what you need to is invest in the development program at your law firm to help these people onboard and help them succeed. You just need to be deliberate about what is the mentorship that people are going to be providing them through their onboarding process, through their development process, who are they going to be learning from on a daily basis? I think too many organizations hire those great raw materials, and then just kind of throw them into a cubicle and say, “Figure it out”, and most people will fail in that kind of environment. So I think you need to be very deliberate about “How am I going to help this person train, how am I going to develop them, who are their mentors in the organization going to be”, maybe even invest in some external resources. I’m a big fan, and a big believer in, coaching. And I’m sure that that’s something this group believes in as well. Hire, we’ve got an internal coach at Clio. And again, this is something we can do thanks to our scale right now, but we have dedicated internal coach that just works with, they can work with every and any employee that wants to sign up for it, and essentially, have a flavor of CEO coaching for every employee that can help. These coaches help them work through their professional challenges, help them develop, help them get better at their interpersonal skills, help them navigate some difficult conversations, and that’s extremely powerful. So you can hire external resources and bring those into your law firm as well, and really see amazing acceleration of that talent over the course of just a few months. And certainly over the course of a couple of years, you can go from that fresh out of school, high-potential candidate, to somebody that is maybe one of the highest impact people at your law firm, because they’ve got that hustle, they’ve got that energy, and they want to succeed. But you really need to be deliberate about building that infrastructure around them to let them succeed.
So I want to wrap up with a question for you. We’ve talked a lot about culture and about people. But one of the things that I think Clio brings to the table is simply technology. And if you look over the last, you know, 12-15 years, the adaptation of technology by the legal community has grown tremendously, probably more than at any other time in the history of law, has there been such a mass adoption of technical tools to get people where they’re at. So let’s look forward a little: because now, you know, working with the Cloud products and using, you know, CRMs and that type of thing, has become somewhat of the norm. Certainly, there are plenty of firms that haven’t done it. I don’t know if those firms are going to be around in a decade from now just because, you know, they’re the dinosaurs, right? But let’s, let’s go forward a decade. What do you see as somebody who’s you know, who’s in the field as the future of technology and law firms? Where do you think we’re going? You know, just let’s, let’s talk a little bit about that before we end this.
Sure. So I think if we look at the past decade of technological development, and even if you look at the past 50 years of technology and law firms, a lot of it has been focused on internal productivity in law firms, the mundane, but necessary aspects of running a law firm task management, calendar management, trust, fund management, matter management, document management, all the tools that help a law firm operate efficiently internally and help avoid all the common pitfalls that that might see, you know, disbarment or other disciplinary action take place. So I think, as you pointed out, Jay, I think this is almost table stakes down. If you’re not a law firm that is using practice management tools, like Clio internally, in your law firm, you’re going to be left in the dust. But I, I think, as we move beyond that chapter of technology adoption in law firms, I’m a huge believer in the next chapter. And the next kind-of, wave of transformation that’s going to happen over the next decade, really being about redefining the client experience, and redefining how law firms interact with clients and interact with prospects over the internet. And I think we’re, we’re going to see a really exciting transformation over the next 10 years. And I think a bigger transformation, if you’d asked me that same question, even six months ago, I might have given a slightly different answer, but with COVID, and the amount of acceleration that that’s happened thanks to COVID, I really think that the next decade is going to be the most exciting decade of legal technology ever because of the pressures that COVID has put on the industry to accelerate and to drive some of the change that is so necessary, if you look at at legal as a whole. And the impact that the internet has had on almost every industry on the planet from, you know, from shipping to commerce in general, to banking, you name it, it’s had a transformation. Medicare, it’s had a transformative impact. But the legal industry is still relatively untouched by the internet. And I think the theme over the next decade will be the decade that the internet finally fundamentally transforms the legal industry. And I think this will be a multifaceted level of impacts. I think we’re seeing again, thanks to COVID-19, I wouldn’t have been as optimistic about this six months ago, but we’re seeing it in the courts, them leaning into video conferencing tools. I think we’re seeing individual law firms understand that maybe they don’t need a physical law office. I think we’ll see bricks and mortar Law Offices in 10 years, maybe seen as quaint as the brick and mortar bookstores, which again, still exist to a much smaller degree than they did before. But most people are buying their books online. And I think most people will be working with their lawyers online. In the future, I think we’ll see lawyers move away from the brick and mortar law offices to distributed work-from-home environments or to distributed co-working environments. We’ll see more lawyers working out of rural areas where they can live and work at a much lower cost basis than they did previously, and we’ll see an increase in people’s ability to access justice, which I think is a huge positive thanks to these technological transformations as well, because the average law firm will be able to deliver legal services at a much more affordable rate, and I would also say priced and packaged in a completely new new way. Maybe we’ll see more, well, I’ll say that a bit more strongly, I believe we’ll see much more in the way of subscription legal services, we’ll see legal services, priced and packaged, like a Shopify storefront rather than this complex, billable hour model that consumers have such a hard time parsing. So those are some of the underlying changes that I think will we’ll see. And the overall theme will be a shift away from the inner workings of a law firm and helping get that right to almost the outward facing interactions a law firm has, and really transforming how law firms do everything all the way, from in-taking their clients to where their websites will see online chat bots, be more pervasive, we’ll see the idea of clients phoning in 800 numbers start to fade in the rearview mirror, all the way through the course of delivering the work, a product of interacting with clients that will happen over Zoom calls rather than through in-person meetings. We will see tools like E-signatures become, again, completely table stakes. And the entire interaction with a client will be a digital one. And I think that’s, that’s where we’re headed to in 10 years, and I think that’s gonna be a really exciting chapter for the industry.
Oh, Jack, incredible. I feel like we’ve just literally drank from a firehose, so much to think about, so many nuggets in there to bring back and a vision for the future. A lot of what we spend our time talking about. And, you know, for some of us that are sort of pushing that way, it’s great to see that somebody like yourself is at least seeing that that’s, that’s where we’re all headed. Jay, you got a final word?
No, I just I mean, like, like you said, it really is drinking from a firehose, and I think you know, for decades, lawyers had this monopoly on knowledge, and they sold their knowledge. Now that knowledge is out there because of the internet, and so, what the lawyers have to do is sort-of change what they sell. And what they sell isn’t the knowledge anymore. It’s how to use that knowledge for the best use of the client, and the lawyers that employ that model, I think, are going to be the ones successful in the new paradigm.
I fully agree. It’s going to be an exciting transition.
Yeah, I’m looking forward to it.
Thank you for your time. I’m sorry that the cloud conference this year, the Clio cloud conference, will be in the cloud. But I hope sometime in the near future, we get to be in person, because that’s, that’s a lot of fun, and a great networking space that you’ve created.
Likewise, I look forward to that as well. Thanks for having me, Seth and Jay.
Thank you so much, Jack, have a wonderful day. Wow, Seth. I’m just saying, Wow, because we got so many things there that you can really work with. What were your thoughts?
You know, I thought this was one of the best delineations of the steps that a law firm needs to take for grow and scale. I was blown away. I’ve been to the Clio cloud conference where it’s focused on Clio, as it should be, but to get into the inner workings of how he grew, focusing on values, takeaways on interviews, those are all the things that I struggle with. And I feel like, you know, I got more from this that I can’t wait. My next call is to my team saying, Hey, we got to make sure we’re focusing on this, this and this moving forward.
Yeah, I really think there’s a lot of good stuff here. You know, normally, like I did last week with Mark, I’m going to take a few moments. Now, I’m actually going to sit back down now that I’ve seen it all in one spot, I’m going to go back, rewatch it, take some more notes, so that I can really put pen to paper and make things happen. Because I think there’s a lot of good takeaways there. So I want to invite you all, if you if you want to, you can watch this again, you can also download our podcast, which is available on all the major podcasting platforms, including the Maximum Lawyer podcast feed, you’ll be able to get a copy of this show. We’ve got some great stuff coming up for you in a couple of weeks, we’ve been working really hard, making the show the best possible show, we’ve got an episode coming up in the next couple of weeks, our top 10 growth hacks and you’re gonna want to be sure to tune in for that, because we have a lot of great ideas that are going to help you take your level, up to up and up and up and up. And that’s really what it’s all about. We’re all here all in on growth. So I want to say thank you so much for being with us this week. Once again, Seth, hey, guess what? We ran long. Can you imagine that? We ran long, as normal. But for that, I’m Jay Ruane, he is Seth Price, We are Max Growth Live, and we’ll see you next week. Bye for now. Thank you much. Have a great one.
Subcribe to our newletter to receive news on update
