The Law Firm of the Future? A sneak preview

As we start to emerge from Covid-19 and take stock in a post pandemic world, is there an opportunity to rethink the future law firm operating model? What does the future hold for law firms and the legal industry? Is it a traditional partnership model with swollen pyramid, silos, billable hours, and lack of client centricity? What did we learn from the pandemic? Will we retain some of the enforced benefits such as flexible and hybrid remote working, better work-life balance, shift to digital, omni channel client interactions, online Courts, and more flexible Court rules? Fast forward 5 years from now, what does the legal landscape look like?

With proposals for multi-disciplinary and collaborative partnerships on the horizon in Ireland, the future practice of law is both uncertain and exciting. Enter 'NewLaw'. NewLaw is a term coined by Eric Chin in 2013 which has been significantly piloted and reawakened by Covid-19. NewLaw is the antithesis of big law or traditional law firms. NewLaw firms use disruptive technologies, more efficient use of human capital, value-based pricing, and different business models. Client engagement in NewLaw firms is holistic, client centric and pro-active rather than merely transactional. Today the legal industry has reached an inflection point, driven by changing client demands and expectations, and, of course, technology. ?All of which has been precipitated by Covid-19. ?With disruption already well under way in jurisdictions like the UK and US, adherence to the pre-Covid-19 status quo in Ireland is no longer sustainable or indeed viable. Notably, the 2021 Smith & Williamson Annual Law Firm Survey hints that we are now entering a period of ‘new normal’ where the ability of firms to “learn, adapt and change” will be critical to future success. So what does the law firm of the future look like. Here’s a sneak preview.

Innovation, Strategy and Change Competencies

History reminds us that firms who innovate during times of uncertainty or crisis reap the benefits long after. The late Steve Jobs of Apple viewed innovation as “the ability to see change as an opportunity, not as a threat.” Charles Darwin stressed the importance of adaptability when he said: “it is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.” Law firms of the future must develop innovation, strategy, and change competencies if they are to grasp the opportunities and sustain themselves over the medium to long term. The pandemic has reinforced the importance of resilience, agility, and the critical role digital technologies play in client service. Firms that have these competencies will have an ability to carve out a path from the rest of legal field in the future.

Diverse Professional Workforce?

Diversity and inclusion will take greater stage in the priority ladder for law firms in the future, as they realise the benefits of cognitive diversity in the workforce. Law firms traditionally approached talent attraction, development and working practices, senior and leadership roles from a certain conservative, risk averse viewpoint. Most lawyers are typically left-brain thinkers - logical, analytical, and methodical. They prefer problem solving and logical decision-making. Right-brain thinking lawyers are largely in the minority. Historically, perhaps there was also a lack of diversity of gender, age, disability, sexual orientation but also cultural and class background. This is improving but the challenge for law firms is to move beyond equality lip service to a workplace that is truly inclusive.

The Law Society of Ireland’s Diversity and Inclusion Taskforce promotes equality, diversity, and inclusion in both the Society and the professions.?According to Law Society reports, 53% of lawyers currently practising in Ireland are women. However, only 35% are partners, a statistic which reveals that we are not there yet, and firms will continue to implement strategies to address this. A diverse professional workforce with more right sided brain thinkers with the ability to innovate, be creative, to think holistically and be big picture orientated, will become increasingly important. Professionals in areas such as legal project management, technology, digital marketing, and pricing will be in demand in the law firms of the future.

Innovative Pricing

Benjamin Franklin’s adage that ‘time is money’ symbolises the much beloved law firm billable hour. If a law firm’s business model simply sells time, it must do either of two things to increase revenue: sell more time or simply increase its hourly rate. This model is increasingly accepted as dissatisfactory as it completely ignores client value and fosters a legal factory production line mentality, anathema to creativity and innovation. ?Research from McKinsey found that Covid-19 has accelerated digitisation of customer interactions with firms by several years.?With technology now supplementing professionals work, selling time alone is no longer a sustainable business model.?The real competitive advantage for law firms is leveraging its intellectual capital, delivering effectiveness in client service, and capturing client lifetime value. Innovative law firms understand that better innovative pricing options exist to maximise client value such as value based and subscription-based pricing to mention but a few.

Digital Law Firm

Technology is now embedded into virtually every aspect of our personal and business lives. It is reshaping businesses, economies, and the future world of work. It is simply a game changer, acting both as a disrupter and enabler. Law firms that ignore digital transformation do so at their peril as it is no longer a nice-to-have luxury but an urgent necessity. Technology means that we can now serve our clients better, faster, cheaper, and perhaps with a higher degree of quality than before. Law firms of the future should have digitisation high up on their legal agenda with the shift to digital likely to create new lines of business for both lawyers and law firms.

The first step of digitisation is to convert a law firm’s paper file to electronic. This is now already underway in many law firms. Law firms should encourage and facilitate clients to communicate digitally via a secure platform or other suitable medium. After that adopting workflow software to automate tasks, workflows, including reminders about deadlines, Court dates and document automation can greatly assist low value or volume work and enable lawyers to focus on higher, value add items. Once this digital foundation is in place, firms can start using more sophisticated technologies including AI, data analytics and others to identify patterns and trends in data, and opportunities to create new markets. The reality is that firms will be encouraged by their corporate clients to adopt new technologies. Whilst technology will undoubtedly do more in the future, it will not do everything. In the authors opinion, technology itself should not be viewed as a panacea or magic bullet. At the core of digital transformation are investment in innovation and people, both essential for a growth strategy. Rather it is the fusion of people, technology and process that can deliver superior results for law firms in the future.

Different Business Models and Pay Structures

NewLaw is best described as the law firm on a diet. NewLaw sheds some of the elements that are under pressure under the traditional partnership-based law firm: the swollen traditional pyramid, long hours, high fixed costs, inflexibility, and can provide better work life balance, without the need for rainmaking and billable hours. Simply, we must acknowledge that the legal industry is shifting, and the question must be asked do we need to break free from the traditional law firm model? Is it inhibiting progress? Research reveals that that consultancy, freelancing and virtual law firm models with a light variable cost base are now flourishing in the UK and beyond with different renumeration models to suit individual lawyer needs.

Value Creation & Delivery Ideology

Warren Buffet famously commented that “price is what you pay, value is what you get.” Law firms of the future must concentrate on client value creation and delivery, not just value capture. How do law firms demonstrate true value to businesses? How can we move away from a perception of cost centre mentality? Listening more to clients’ wants and needs can help. For example, corporate clients are looking for law firms to add value to projects rather than simply getting the work done at a competitive price. Research indicates that law firms traditionally believe that price is the top criteria on which they are evaluated by prospective commercial clients. In contrast, clients placed more emphasis on specialisation and leveraging technology to improve collaboration, productivity, efficiency, and work processes.

ESG Responsible

Investors and businesses are growing increasingly concerned about sustainability and doing business responsibly. The triple bottom line is not just the preserve for magic circle law firms or a set of ubiquitous corporate buzzwords. ESG factors assess the impact of an organisation on the environment and society. The author predicts that ESG will become a corporate responsibility that potential customers and clients in law firms expect on a routine basis in the future. What does this mean for law firms? Now is the time for firms to start thinking about ESG and formalising their ESG strategies, including assessing their carbon footprint. Firms should assess whether they have the necessary in-house expertise to properly advise clients in this space, which will undoubtedly be a growth area in the future. ESG will also play an important role in the areas of talent recruitment and retention in the future. Early research indicates that firms who have already adopted ESG strategies have achieved improvements in areas such as innovation, operational efficiency, risk management, stakeholder relations, and firm reputation, which in turn is driving better financial performance.

Client Centered

The future of law is client centered because the purpose of law firms must be their clients. However, up to now, law firms have surprisingly not positioned clients at the epicentre of the legal service offering. The perception of some buyers of legal services is that engaging a lawyer is too much trouble, too expensive and overwhelming. We need to change that perception. Client centered law firms will succeed here in the future because they focus on experience in a world where experience is key, and can provide a frictionless, barrier free service offering that is inherently linked to client value. ?

Client Experience

Today we live in the age of the consumer. Better known as clients in the legal world. For today’s clients, experience, and ease of going business are paramount. If other sectors can deliver fantastic client experience, great service, and satisfaction in consumer interactions, why not the legal sector? Modern clients expect more than a professional service, they expect an end-to-end customer experience that makes sense. Clients buy more than just value in the form of advice and counsel received from a law firm. If a law firm is difficult to do business with, or lawyers are just simply rude or do not return client phone calls, sooner or later the client relationship will suffer and evaporate. Client experience is now part of the legal service offering, together with legal services. In other words, in the future we should not just provide a legal deliverable or outcome, we should in tandem provide a fantastic legal experience.

Agile, Multidisciplinary & Collaborative Approach

Covid-19 brutally demonstrated to law firms the benefits of structural ambidexterity. Law firms were required to become ‘mobile’ overnight and this learning process can de defining for the industry if we do not revert to old ways of doing things.

The Legal Services Act 2015 proposes the introduction of multi-disciplinary partnerships (MDPs) for the first time ever in the Irish legal sector. An equivalent of MDP’s (known as alternative business structures (ABSs)) have been available in the UK since 2012 and their introduction has had a direct and positive impact on promoting the interests of consumers, competition and encouraging a strong, diverse and effective legal profession. The value of ABS’s in the UK has been to provide a structure for firms wishing to provide legal services differently to address legal needs and access latent demand for legal services. Research also indicates that these types of structures are much more likely to leverage technology and deliver the highest levels of service innovation.

These winds of potential change are also exemplified in the General Scheme of the Courts and Civil Law (Miscellaneous Provisions) Bill 2021. This proposed new legislation, if passed, will allow lawyers to enter partnerships with barristers, which would reduce duplication of services and allow for litigation firms to provide a full service without the need to instruct outside counsel. These proposals, which are not without legitimate concerns regarding the potential end of the independent referral model, and the creation of ‘super’ chambers within magic circle law firms, point to a more collaborative future approach between the professions. ?For the first time ever, lawyers and barristers could jointly provide legal services and facilitate a greater range of services and legal expertise for clients.?

Conclusion

Peter Drucker, the father of modern management, once famously cited that: “the only certainty of the future is that it will be different.” In the future, the traditional law firm model will be, in the author’s opinion, unrecognizable. ?We will see ‘legal service providers’ rather than conventional law firms and these may well be subsumed into the wider umbrella of professional service firms. If MDP’s are introduced in Ireland, like in the UK, they will dramatically increase competition, levels of service innovation and offer exciting M&A opportunities to enable the provision of a fully integrated, end to end service across the professions of accountancy, tax, audit, advisory and legal. The big 4 accountancy firms are already seeking to formally incorporate legal into their overall service offering. The recent launch of EY Law in Ireland is testament to this fact.

The successful law firm of the future will have at its core innovation, strategy, and change competencies. They will also have full digital capabilities both in-house and client facing. These elements will have knock on implications for the make-up of future law firms and we will see a greater emphasis on the recruitment of diverse, non-legal professionals equipped with the emerging skill-sets of the digital 21st century. The best law firms will be client centered, have an obsession will value creation and delivery ideology. Above all, they will provide a brilliant client experience. They will have an ability to price innovatively and not be slaved to the billable hour, time recording, utilization, and realization rates. These legal service providers will understand client lifetime value, be agile, and utilize different business models with different pay structures. They will adopt a multi-disciplinary and collaborative approach, instead of pyramids, walls, and silos. ?Above all, the firm of the future will be sustainable and will have a keen eye on its ESG corporate responsibilities to support the agenda of its clients and wider society. ?

?

?

?

?

?