Originally published in the Legal Intelligencer and New York Law Journal.
BigLaw is not dead. Nor will it die. The visions laid out by noted experts in Tomorrowland and End of Lawyers? shine a light on the types of things a futurist might predict: (cue radio voice) “In a world run by robots and with universal income…” The threats are real. Yet as Gina Passarella points out in her article, “The Dance Around Change,” tangible shifts in the business model of law are slow to come. Resistance is high, as is “dabbling” – a non-committal attempt to test the waters with little to no real risk (or reward). What can the law firm executives of today do to make the incremental, fundamental changes to prepare their firms for what’s to come? And perhaps equally importantly, do they want to?
As with any other attempt to prognosticate, the very premise of “future-proofing” a law firm is wrought with caveats and “what-if” scenarios. There is no magic bullet, no one size fits all solution. There are, however, a set of fundamental, intertwined elements that together will combine to determine the market position, financial health and, ultimately, sustainability of a law firm.
Culture – Many law firms espouse characteristics of their “unique” cultures, citing as distinctive the level of collaboration, collegiality and genuine “likability” of their partnership. Assessments of law firm culture, though, reveal a somewhat different picture. In particular, two common attributes of law firm cultures are relevant to prospects for the future: 1) the value the cultures place on Perfectionism; and 2) the variability in how different groups across the firm experience culture. As we contemplate the future, both of these tendencies will prove themselves at odds with demands on law firms to innovate and embrace models that extend beyond that of the traditional partnership (see below).
Furthermore, a third tendency, indicating employees outside the partnership see partners as the most change-resistant members of the organization, places additional pressure on the cultural dynamic, as well as on the basic structure of the law firm (aka partnership model). If lawyers and staff outside of the partnership do not see the partners themselves as willing to change, virtually every effort to innovate will face a crisis of leadership. Partners will be under intense scrutiny to model behavior and others at the firm will be quick to pounce on opportunities to slip into historical routines and habits. Efforts to deepen understanding of cultural undercurrents and deliberately measure and manage them will help firms to effectively undergo transformation.
Talent models – Already, many firms are taking action to cope with pressures to traditional talent models: shrinking associate classes; aging partnerships; generational transitions; and demand for alternative staffing. As client spending continues to flatline – or decline – smaller partnerships are likely to become the norm and embedded professionals (without law degrees) will become an increasingly vital part of the law firm landscape. An increased reliance on “non-lawyer” talent will demand new operating structures and, more than likely, a dramatic transformation in the cultural foundation of many firms. Just as storied Managing Partners have led many high-profile success stories in the past decade, a new generation of C-suite leaders has the potential to become the cornerstone upon which a select group of law firms carves a new path forward. It is the rare model today that will support this monumental shift in thinking and approach to doing business.
Technology – The consummate elephant in the room, technological advances have completely transformed entire industry sectors from publishing to retail to financial services. The delivery of legal services is not immune. Momentous changes in how law firm clients do business will indubitably impact law firms as well. Whether in the application of technology to actual legal service delivery, the integration of AI tools to drive better outcomes, or the adoption of virtual platforms (or currency) by which to transact, law firms that establish a leadership stance in how to leverage technology to do business better will forge ahead more quickly and effectively.
Strategy-Structural Alignment – As the legal services spectrum expands and many law firms struggle with servicing clients – and partners – in a range of practices from commodity to bespoke, it becomes imperative to adopt operational models and structures that can accommodate this diversity. Virtually every aspect of the way law firms operate, from compensation systems to performance evaluation protocols to processes from recruitment to intake, originate from the delivery of high-end, tailored services. The sheer overhead cost of administration can render some clients a loss to the firm (and, for some firms, the number of these clients can climb into the thousands…). Well-defined boundaries and increased discipline in how the firm pursues and manages its talent, clients and growth will help to ensure longer-term financial performance.
Exacerbating the challenges of strategy-structural alignment is a poor understanding of the basic concepts of profitability and growth – particularly as they apply to firms shifting towards a more corporate approach to doing business – and a related overall lack of self-awareness. This latter point is inextricably tied to the next core element, data.
Data – Few law firms are routinely and adequately analyzing internal and external data in a way to give them a clear, concrete understanding of their client base, markets and talent pool. Fewer still are acting decisively on this information. Fact-based, data-driven approaches to evaluating options and making business decisions are sorely lacking in law firms. Initial findings from a joint study of law firm competitive intelligence from Acritas and The Tilt Institute indicate the majority of law firms lack a formal, proactive approach to gathering, distilling and employing data analytics. In the absence of well-researched business cases, law firm decisions are often wrought with imprecision, false starts and higher risk – outcomes most people, and lawyers especially, find instinctively unappealing. Confounding the issue are partnerships wary of negatively impacting (often misunderstood) cultural norms (see above) that avoid difficult decisions or changes that may be unpopular. It is no wonder change in the sector has been so sporadic and sparse.
Together, these five elements create a microcosm that has the potential to become the foundation for tomorrow. These aspects work together holistically. Due to their symbiotic relationship, efforts to maneuver on one front with disregard for the others often yields tepid results. Hence the stalemate in which we find the industry. Technology investments fall flat in a culture adverse to change. New talent models flounder under antiquated compensation structures. Inadequate analytics lead to poorly understood and inarticulate strategic decisions. And around we go.
The solution, for those law firms motivated to find one, will come from a concerted effort to truly understand – with validation – their status on each of these five fundamental pillars. This act of self-reflection not only helps to crystallize a path forward, but also serves as a compelling story on which to engage the broader partnership. Then the real work begins in earnest, with a clarity of purpose emblematic of endeavors that create the future.