The Future of the Law Firm

A recently released report from the Eversheds international law firm discusses some conclusions for the future of the legal profession. One of the elements not really addressed in my reading of the release was the disconnect between lawyers and their clients in large corporate enterprises. Why should this be the case? Why should lawyers and the folks they represent be far apart in their thinking about the profession and how it is being conducted? 

There is no simple conclusion. But one element may very well be that clients (General Counsel) feel pressure down from their CEOs and Boards of Directors. They need to be more price and cost sensitive.  Partners in larger law firms, on the other hand, want larger compensation packages for themselves in order to be seen as peers of the CEOs who are earning far more than in the past; lawyers do not want to be seen as vendors, but as peers … and frequently compensation is a factor in this perspective.  Of course, it’s hard to be a peer with a CEO whose average compensation went from 4:1 to 17 and even 34:1 between him/her and the average employee working for him. And it’s a bit disingenuous for that executive to say that lawyers’ fees are too high. Even in companies whose stock is falling, or whose profits are falling, it is rare to see the CEO offering to reduce his/her compensation.

Here are some of the key findings of the research report and my thoughts related thereto:

1.         Clients are concerned about continuously increasing fees.

            The report suggests that in-house counsel believe that law firms cannot continue to increase their prices.  This may be true in the opinion of General Counsel; however, it is not how General Counsel act.  In fact, despite protestations to the contrary, General Counsel continue to engage large law firms with large billing rates, even though very competent, but smaller law firms are available.  In the meantime, for legal needs of the average American, there really is very little alternative.  Either their legal needs go unmet, or they must pay the higher fee.  As in every other aspect of American economic life, costs are increasing.  It is not clear to me that legal fees are rising any higher than the cost of living.  Merely take a look at the price you recently paid for gas.

 2.         Priorities between clients and lawyers diverge on controlling costs.

            This conclusion should not be a surprise.  In focus groups done over 10 years ago, lawyers believed that clients were very concerned about their fees and the reasonableness thereof.  However, clients in similar focus groups, conducted at the same time, ranked reasonable fees down the list of their priorities, sometimes even lower than half way down.  Thus, it is not surprising to this writer that General Counsel and their outside counsel should differ on the importance of controlling costs.

 3.         Hourly rate remains resilient.

            Again, this conclusion does not seem to be a surprise.  Was it Mark Twain who said everyone is talking about the weather, but no one is doing anything about it?  So too, here, everyone talks about the billable hour being an anathema to the legal community.  In a recent example, one prominent lawyer suggested that the billable hour would be the death knell of the legal profession.  Yet, neither he nor his firm were prepared to adopt a different billing method, though there certainly are alternative billing methods available. This method may not be the best or fairest, but it certainly is the easiest to understand.  There is something to be said for that.

 4.         Legal advice will not be commoditized.

            It seems that this conclusion is, at best, tenuous. It is also clear that the clientele of Eversheds is of such a sophisticated nature that much of their work is "one-off." Under such circumstances, using technology to be more efficient and effective is important, but it does not rise to the status of commoditizing legal work being performed.  In the more mundane world of legal services, where the vast majority of lawyers conduct their work, technology and commoditization will become significant.  Or, at least the threat is that it will become significant with significant adverse consequences (especially under the hourly billing modality) to lawyers and benefits to clients.

 5.         Top law firm partners are happy, compared to their assistants.

            I suppose that this conclusion requires a definition of "happy." It certainly appears that one would be happier than one’s assistant with a vast difference in compensation levels.  Despite this difference, however, I know too many large firm partners who are close to "burn-out" or at the very least are "unhappy" in their day-to-day occupation.  In fact, there are just too many reported cases of alcohol and drug abuse; how many such cases are not reported can only be left to one’s imagination.

 6.         Flexible working is not the answer to work-life balance.

            At least one half of the clients and partners in large law firms did not think that flexible working time schedules would be a viable solution to work-life balance issues, especially in transactional areas.  Yet, it is an issue that remains on top of the table and must be dealt with in order to satisfy the needs of the now sometimes four generations of lawyers working in the same office environment.  What is the answer is clearly not universally yet known.  I suspect that the real answer must be left to one-on-one negotiation between the law firm and the individual lawyer who needs the flexibility.  The law firm that fails to address any such request in a manner satisfactory to the requestor will lose that talented individual, and perhaps more.

 7.         Clients and partners disagree about work-life balance.

            To some degree, this conclusion is a continuation of the previous discussion.  It seems that the parties are split equally. One half of clients and one half of partners believe that flexibility will solve the work-life balance, while the other half of each disagrees. As noted above, it is a problem and one that must be addressed in order to keep the younger generation involved with the legal profession.  The older, in-power generation scratches its collective head for a solution. Despite the best of intentions and goodwill, this older generation seems to be unable to understand why their followers (the generations behind them) don’t have the same values as they do. Nor do they seem to be able to develop generic solutions acceptable to the younger generation as a group.

 I remember the argument that we have enough lawyers in this country; that all legal needs could be met, that it is merely a matter of matching the supply with the demand. Perhaps there is a parallel here. It may be that our real problem is that we must match the clients who accept  work-life balance for themselves, as well as for those who serve their interests (demand), with the attorneys who believe that they can perform excellent legal services at the same time they have a reasonable life (supply).

The Eversheds report clearly is a great starting point for discussion. Unfortunately, there are no solutions provided. And other than suggesting a willingness to be flexible, open to discussion and new ideas … and occasionally trying out a new idea here and there — I have not heard any “expert” in generation differences develop a “one answer fits all” solution. Legal powerhouses must listen and adapt to the needs of both their lawyers, their staff and their clients in order to assure their business continuity. This is a “disaster” of a kind we’re not accustomed to thinking about, and certainly was not contemplated by the law firms involved in reacting to the disaster of 9/11 in my book, Disaster Preparedness & Recovery Planning for Law Firms. However, the basic principles there apply here as well. Planning (for the future) is essential to business continuity, the underlying principle of business.

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