Not long ago, Axiom was often touted as law’s next big thing. The on-demand corporate legal talent company that launched in 2000 has enjoyed nearly two decades of expanding revenue, client base, talent pool, and brand recognition. Still, the industry spotlight long cast on Axiom has shifted in recent years to other legal service providers, notably The Big Four, United Lex, and Elevate. This has caused many in the industry to question: “What’s up with Axiom?”
Spoiler alert: Axiom is doing just fine. It serves more than half of the Fortune 100, reported 2018 revenue run rates of $360M, has a curated talent platform of approximately 2,000 lawyers/professionals across seven countries and three continents, and a well-established global brand. Axiom is highly selective—only 5% of attorney applicants are hired. Axiom’s legal team is not only highly pedigreed but also experienced. Axiom attorneys have an average of over 15 years of experience ranging from recent graduates to former law firm partners and corporate general counsel. Its workforce is considerably more diverse than large law firms: Women comprise 55% of Axiom’s lawyers globally, and the company is known for having a large minority workforce. Axiom’s turnover rate is also markedly lower than the large-firm benchmark. So why the gloom and doom?
Some Twists and Turns
Eyebrows were raised when Axiom invested in a managed legal-services business sometime in 2015. This raised questions about Axiom’s market positioning as well as whether the new business unit, and its eventual digital contracts business, meshed with the company’s core talent/resourcing model. The chatter intensified in November 2016 when Founder and long-time CEO Mark Harris, the face of the Axiom brand, was replaced by Elena Donio, a seasoned tech executive but new to the legal industry. Questions about Axiom came to a head on February 19, 2019 when the spin-offs of Axiom’s enterprise contracts intelligence (Knowable) and Axiom Managed Solutions (AMS) units were announced. Axiom’s remaining corporate legal-talent business simultaneously announced its intent to go public. It is now in a quiet period, an SEC-mandated embargo on promotional publicity. The enforced silence has further fueled speculation—and doubts—about Axiom’s future.
The Axiom Talent Platform Was And Is A Well-Funded, Scalable, Horizontal Structure Promoting a New Legal Culture
One way to understand Axiom’s recent moves is to examine its roots. When Axiom launched in 2000, it endeavored to create a new model of on-demand corporate legal talent. Harris has often said Axiom was created to address unhappy and over-billed clients and to improve the lives of many of the lawyers that worked for them. Harris, a lawyer-turned-entrepreneur, drew from personal experience as a Davis Polk associate. He saw an opportunity to reconfigure legal delivery by altering its structure, economic model, and culture to better suit clients and lawyers. Harris recognized the growing misalignment between firm lawyers and equity partners as well as firms and clients. He constructed a law company—not a law firm—designed to respond to both.
around whether it was a law firm or a law company. The distinction is
significant for financial, structural, risk retention, regulatory, and cultural
reasons. Axiom replaced the traditional hierarchical, leveraged firm
partnership model with a flatter, more egalitarian, and agile one. It
jettisoned the partner/associate distinction in favor of “Axiom lawyers.” The
company also became law’s first scaled “gig” provider, tapping into a rich
talent pool of lawyers eager to engage in sophisticated corporate legal work—but
not if it meant logging 2,000+ billable hours. Axiom endeavored to make the
practice of law fun again. It’s whimsical orange logo, hip office, and glossy
website—more Club Med than the traditional law firm—were testaments to a new
kind of legal delivery and a different culture that persists to this
Harris understood the importance of capital and landed it early on. Axiom received its first outside funding round in 2000, raising $5.4 million, and turned a profit in 2003. The company has had three subsequent funding rounds. The investments fueled expansion, helped attract talent, and enabled Axiom to invest in technology and a strong senior management bench. Axiom had little difficulty drawing qualified candidates from a large pool of capable lawyers craving an alternative to the cold grind of big law. It also collected data on lawyer performance and customer satisfaction.
Convincing buyers, especially conservative General Counsel, was a higher hurdle, especially when Axiom launched at the turn of the Millennium. The legal market was markedly different then than it is today. Law firms were the industry’s dominant provider, and their hierarchical partnership structure, leveraged economic model, and precedent-bound, insular culture were major obstacles confronting Axiom or any other provider introducing a new delivery model. Law firms had a virtual monopoly on the supply of top legal talent, and they played the talent card to justify ever-escalating rates. Axiom recognized this and blunted the quality issue by recruiting lawyers from top firms and stripping out firm cost-escalators from the traditional model—partner tribute, lavish offices, bloated staff etc. Axiom was Big Law quality at half the price.
Axiom’s Model Was Well Suited To The Post-Financial Crisis World
The global financial crisis caused a reboot of business and the way goods and services are bought and sold. Law was not immune; clients demanded “more with less,” and intense pressure was applied to General Counsel to reduce legal spend. This played to Axiom’s model, and the company flourished even as law firms reduced the size of incoming associate classes, laid off lawyers and staff, and “de-equitized” underperforming partners. More work was in-sourced to in-house departments, and Axiom’s flexible model became an appealing alternative to increasing corporate legal department headcount.
A 2012 The New York Times article reporting on the post-financial crisis legal landscape concluded that “a more sweeping transformation may be on the horizon. And it may look a lot like Axiom Law.” Axiom had 900 lawyers, an array of impressive corporate clients, and a new organizational and economic model that was well-suited to the austerity of the time. Harris observed that, “the interests of law firms went from serving the clients to serving themselves.” Legal consumers did not much care whether Axiom was a law firm or a legal talent company. It mattered to Axiom, however, because: (1) as a talent company, it was not subject to capital investment constraints affecting law firms; (2) senior management and high-performing lawyers/professionals could acquire (residual) equity in the company; and (3) Axiom’s risk shift to the client conferred a further cost advantage over firms that retain risk.
Questions About Axiom’s Future
The three simultaneous February 19, 2019 announcements raised several questions about Axiom: (1) Why did the company spin off its tech and managed services arms when the market is increasingly tech-enabled and investment in legal tech is at an all-time high? (2) Why did Axiom bring on Donio, a tech executive with no legal industry experience only to spin off its core tech unit a couple years later? (3) Why would Ms. Donio, a highly regarded tech executive, elect to stay with Axiom’s talent company post-spin-offs? (4) What is Axiom’s business model that is about to be publicly offered?
No one outside of
Axiom’s senior management can be certain of the answers—and they cannot say
because the company is understood to be in a quiet period prior to its
forthcoming IPO. The opinions expressed above and below are solely the
author’s—Axiom declined to answer questions or provide information in connection
with this article, and all data referenced herein was in the public domain.
Still, there are many clues—and educated inferences—to be drawn from public
information on the company as well as broader marketplace maturation.
Axiom spun off its tech and managed services businesses, but it did not go cold-turkey on tech—far from it. Al Giles, the company’s London-based Chief Revenue Officer, gave a presentation at Legal Geek last October on legal industry innovation and modernization that hinted at Axiom’s direction. Giles’ remarks made clear that technology is a critical complement to any curated legal talent pool (leveraging data to map legal talent to task). This is what Axiom is after: its spinoffs—a 21st century talent marketplace.
Ms. Donio’s relief of Mark Harris can be explained, in part, by her experience taking a company to the next level. Her tech background fits well with Axiom’s tech and data-driven talent management model. Going forward, Axiom will likely expand its legal professional talent roster. Ms. Donio and other Axiom senior executives are well-suited to manage the build-up of this critical talent pool. Her election to stay-the-course with Axiom reinforces the conclusion that the company is by no means backing away from tech as it doubles-down on its core talent management business.
Axiom’s decision to spin off its other business units and to go public with one core offering makes sense as an IPO strategy. Its two thriving spinoffs can each scale and focus on their core offerings, allowing Axiom to do the same. It is also prudent from a competitive standpoint. Axiom has taken a hard look in the existential mirror and concluded it will not directly compete with EY, Deloitte, PwC, KPMG, UnitedLex, and Allen & Overy for enterprise legal service business. Instead, it will focus on global legal talent management that will doubtless include both attorneys and other legal professionals.
Axiom has made the difficult decision to forego the short-term revenue of its two spin-offs in favor of pursuing a focused, longer-term path to success. Rather than write-off Axiom, other providers might be wise to engage in a similar differentiation journey in a rapidly maturing global legal marketplace.
Legal Culture, Education, and Training are From Another Era
Law is mired in the mindset and training of the third industrial revolution. The Academy is detached from the marketplace and trains students for practice-centric careers that few will have. Many lawyers still function as they did a decade ago and retain the legal mindset that divides the world into “lawyers and ‘non-lawyers.’” The profession acknowledges the emergence of legal operations as a component of legal delivery, for example, but rarely grants it equal status or accords it a meaningful voice in management decisions. Even when a legal ops professional is a licensed attorney, s/he is, is relegated to second-class status compared to “practice” attorneys. This is emblematic of a profession that talks innovation but walks in place.
The World Economic Forum Future of Jobs Report examines the skills required in the digital age, the fourth industrial revolution. Critical thinking and problem solving, key elements of traditional legal pedagogy remain core skills in the digital marketplace. Other critical workplace skills—notably emotional intelligence (EQ), creativity, cognitive flexibility, and collaboration—are now equally important workplace competencies. These contemporary skills—and others including project/process management, data analytics, design, business basics, digital basics, risk prediction/management, and talent management—are largely ignored by the legal Academy and most executive education programs. They are also undervalued by industry talent managers even as they have become essential to satisfy rapidly changing legal buyer expectations. These skills are also foundational elements of new legal positions to be filled now and many more as yet to be created. The good news is that legal professionals have more career paths, lifestyle options, and geographic nimbleness than ever before. The bad news is that relatively few in the industry are prepared to fill the new roles.
A growing list of clients demand transformed legal services. What does that mean? Legal professionals must meld law, technology, and business and apply principles of digital transformation to the legal function. They must be proactive, data-driven, client-centric, and collaborative. They must appreciate that clients want solutions to business challenges, not legal tomes. Global perspective and cultural awareness are also critical, because law, long provincial by design, is now global. Legal professionals, regardless of by whom or where they are employed, will succeed in the 2020s only if they develop specific transformative skills that emanate from an understanding of key principles of digital transformation.
Law’s skills problem goes even deeper; it is cultural. Many lawyers still cling to self-perpetuated myths that have been debunked by clients. The long list includes: lawyers—not clients—decide what’s “legal work” and when their services are required; all work performed by lawyers is bespoke or at least differentiated; and only lawyers are qualified to deliver legal services. Legal culture is slow to embrace data, technology, new delivery models, multidisciplinary practice, regulatory reform, collaboration, diversity, gender pay equality, the distinction between the practice of law and the delivery of legal services, client-centricity, and digital transformation. Law is rooted in precedent; it looks to the past to prepare for the future. That is no longer the world we live in. Erik Brynjolfsson, a preeminent digital transformation expert, writes in The Second Machine Age that we are now “into a time when what’s come before is no longer a particularly reliable guide to what will happen next.”
Legal culture responds to the warp speed change—when it does at all—with buzzwords, denial, and self-congratulation. The packed calendar of industry award dinners celebrating pioneers, innovation, diversity, and other self-declared advances belies data exposing law’s dreadful scorecard on diversity, gender pay equality, advancement opportunities for non-white males, and other legal guild cultural holdovers. Then there’s the disconnect between the lawyer and client view of industry performance. Law’s net promoter score lags other professions and almost all industries. Legal culture needs a jolt; client-centricity, the ability to respond rapidly and effectively to new risk factors and challenges, data-driven judgments, and agile workforces are among law’s transformational musts.
The Legal Industry is Unprepared for Digital Transformation
The legal industry is failing to keep pace with the speed, complexity, and accelerating rate of business transformation. A recent KPMG survey confirms digital transformation is a key strategic priority for CEOs. It is also time sensitive—85% of enterprise decision makers think they have a two-year timeframe to make significant inroads on their digital transformation before sustaining adverse financial impact and/or lagging the competition. McKinsey reveals the high stakes of digital transformation—data-driven organizations are 23 times more likely to acquire customers, six times as likely to retain customers, and 19 times as likely to be profitable as a result.
Gartner reports that only 19% of in-house legal teams are well-prepared to support enterprise digital transformation. Most legal professionals—including General Counsels and their teams—are unequipped to deliver the transformative legal services that business clients demand. To service digital clients, legal professions must be proactive, agile, collaborative, digitally experienced, and function at the intersection of law, technology, and business. Global perspective, cultural awareness, agile teams, constant learning and improvement, are critical transformative skills and competencies presently considered outside the core knowledge of the law.
There is a widening gap separating client expectations and the ability of legal professionals—in-house, law firms, or other provider sources—to satisfy them. This is due in part to a failure of lawyers and legal professionals to appreciate how technology and cultural transformation are enabling digital transformation of global businesses at scale. Business clients are demanding a different, more holistic and impactful kind of legal service. They expect the legal function not only to protect the enterprise but, equally, to collaborate with business units to create enterprise value. This is not what lawyers and legal professionals were taught at law school or acquired in traditional legal practice.
A Two-Fer Solution: Solving Law’s Distribution and Skills Crises
Law has long had a distribution problem—plenty of lawyers but an imbalance between the corporate and retail (individual and SME) market segments. Unequal distribution and sky-high pricing have fueled the access to justice crisis wherein approximately 80% of Americans and a majority of businesses in need of legal assistance cannot afford it. Derek Bok famously quipped, “There is far too much law for those who can afford it and far too little for those who cannot.”
Rebecca Sandefur, a sociologist and MacArthur “genius” Fellowship recipient, contends lawyers are not required to resolve many common legal issues. Ms. Sandefur turns the access to justice crisis on its head, asserting that it is not a matter of unmet legal need but the byproduct of a complex, inward-looking web of rules lawyers have created. She’s right on both counts. Sandefur’s solution: lawyers must collaborate with other disciplines, use new tools—notably technology—and create new paradigms focused on achieving better client/societal results.
Sandefur’s prescription for law is already being filled in the corporate legal market segment. A handful of elite enterprise legal service providers (ELSPs) are transforming the legal function and expanding its impact by melding practice and delivery capability. Their tools include platform technology, multidisciplinary expertise, data to predict and mitigate risk, global footprints, ability to scale, and deploying lawyers when and if differentiated legal expertise is required. ELSP workforces are multidisciplinary, integrated, and possess the gamut of contemporary skillsets necessary to meet client demands in the digital age. They deploy the tools—especially technology—create new delivery paradigms, engage in collaboration with other disciplines, and achieve better results than traditional models. These elite providers are the embodiment of Sandefur’s theory at scale.
There is a unique opportunity to tackle law’s distribution and skills challenges as solutions for the two converge. Recommendations include: (1) education and training that is use-case driven and tailored to specific market segments; (2) retail segment training focused on new delivery models that are multi-disciplinary, utilize paraprofessionals, automate, and “productize” services to improve access, lower cost, compress resolution time, and leverage legal expertise (a distributed platform model); (3) closer alignment between legal buyers and legal educators/training programs; (4) law school curriculum/career services differentiation based on geography, market, etc. (not all law schools are Harvard); (5) micro-credentialing; (6) required digital training for all legal professionals; (7) regulatory overhaul that better serves clients/societies and is designed to foster competition, innovation, and multi-disciplinary practice; (8) skills mapping throughout one’s career; (9) multiple legal professional tracks keyed to function (think: medical industry); and (10) competency-based education and training directed to solving client challenges.
Many in the legal industry wonder how law students and early to mid-career lawyers will acquire necessary training. This presupposes that their training should be the same as past generations. It should not; how, when, with whom, for whom lawyers are engaged is different today than it was even a few years ago. The sooner the legal industry recognizes this, the more successful it will be in addressing its skills gap.