One of the biggest threats facing law firms is from other lawyers – specifically those working for in-house legal teams.
The development has been one that has been occurring with relentlessness for many years, with Law.com reporting last year that 75 per cent of work for legal departments is handled in-house, with more being retained that way every year.
And now the Guardian reports – under the headline ‘Are we witnessing the Death of the Law Firm? – that the answer to the question for lawyers in Britain at least is complicated.
A survey published by The Law Society, 26,900 solicitors in Britain said that 20 per cent of lawyers now work outside of traditional, private practice law firms and that of those, two-thirds work in the private sector.
It’s a figure that has more than doubled since the turn of the century, with the biggest change continuing to accelerate in the past 10 years.
A similar statistic is evident in other Western jurisdictions, evidencing an ongoing and major shift in the ‘power balance’ in the legal profession in terms of how and where lawyers work.
For instance, in the US, the recent In-House Legal Benchmarking Report from Exterro showed tht 69 per cent of the in-house legal departments handled more than half of their company’s litigation work.
And a similar percentage said that they believed they are structured and managed in terms of legal project management, rather than defaulting to the outside law firms that might usually have taken that role.
The reality is that the in-house teams are becoming increasingly confident and aggressive in their ability to attract top legal talent and handle top-level legal work . . without ‘stooping’ to outside help.
And lawyers believe the trend will continue as Altman Weil’s 2018 ‘Law Firms in Transition report showed in terms of the trend towards in-house work being a permanent fixutre in legal life.
Not good news for the outside firms.
“Businesses have chosen to keep costs down by expanding the size of their teams,” explains Stuart Little, partner at private law firm Shoosmiths. “Three or four years ago they were recruiting commercial lawyers and we lost staff to clients, then in the last few years it was litigators.”
Karen Ngo, director, in-house at Thomson Reuters Legal, identifies a second factor in the growth: “There’s an increasingly complex legislative and regulatory landscape, whatever the industry. To have an in-house lawyer is to have a very valuable partner, and it adds real value to the good management of a business.”
Lawyers want to shape a business. That’s one reason they move in-house rather than advise from afar
For individuals choosing the in-house career path there are a number of clear incentives over life at the firms, including work-life balance, improved remuneration, shorter hours and better holidays and in many cases the lawyers are able to operate to generate new business and create opportunities similar to or better than the firms offer.
“Lawyers want to shape a business. That’s one reason they move in-house rather than advise from afar,” says Ngo.
Senior legal staff are now enjoying an enhanced role in decision making, with more than a third of key organisations appointing a senior lawyer, usually a general counsel (GC), to the board, according to the Solicitors Regulation Authority.
As a result of this upheaval, private firms have to adapt.
The Changing Law Firm
Firms though have been changing for some time. There are numerous factors at play here with the increasing use of temporary GCs, the development of more flexible fee arrangements, the specialist law boutiques and general pressure upon firms to lower fees, or at least work in a more flexible manner and to add value to their services.
The move into full legal services by the Big Four accountants has placed further pressure upon the firms.
There is no doubt that on both sides of the Atlantic there are major structural changes occurring in the traditional law firm model and the move ‘in house’ is one that appears to be here to stay.