How long can law firms survive? Is their demise a case of scandalous rumor mongering, or is there something serious going on here?
It seems apocalyptic to even mention the fact that law firms are destined for obsolescence, but with so much talk of ‘disruption’ and the role of artificial intelligence about, who could be surprised by such talk?
One thing that does seem certain is that the partnership model is destined for the wrecking ball and legal commentator Mark Cohen, a specialist in writing about the legal marketplace, has written a piece for Forbes where he says there is a growing body of evidence pointing to “the advancing obsolescence of the incumbent partnership model”.
Cohen says that the partnership model so enjoyed by law firms hitherto has been for practising law, rather than delivering legal services.
The ‘buy/sell dynamics’ have been dramatically altered by the Global Financial Crisis in 2008, as well as through technology and globalization. Furthermore, there has been disaggregation which has peeled away legal services into other delivery models
What does Cohen point to specifically?
There are ….. key factors that indicate the partnership models is doomed in his belief.
1. The Profits Per Partner Preservation
While PPP remains high, it does so in his view because of belt tightening by firms, but he points to the Georgetown report and other studies that show internal costs reductions can only go so far in maintaining decent profits per partner.
Partner ‘de-equitization’ and showing the door to experienced lawyers that have high client value but are a drag on PPP (read: high salary, no business) will not stanch the erosion of law firm market share–even if is props up PPP in the short-term.
2. Client Dissatisfaction
Dissatisfaction with law firms remains high, which he says is shown by the growth of in-house law departments and specialist or “elite” legal service providers.
Although some strong firm brands are largely price-insensitive, there are problems for law firms with both their structure and the way in which they deliver their services, he says.
3. Multiple Problems
Cohen points to the multiple problems confronting law firms, being –
(1) dissatisfaction and failure to address it; (2) insufficient knowledge of the client’s business; (3) high, unpredictable cost; (4) inefficiency and an economic model that ‘applies brute force’ (read: lots of high-priced lawyers billing loads of hours) accompanied by a failure to assess appropriate value to task/cases from the client perspective; (5) failure to deploy technology to streamline operations and provide enterprise solutions; (6) an absence of process and project management; (7) a transactional approach to client matters rather than one that provides enterprise solutions; and (8) poor customer service.
The fact that legal work must be performed by lawyers is an “urban myth” that has been debunked, he writes.
The delivery of legal services is now a business in itself, which has spawned ‘legal models’ that perform just such services with great efficiency.
But for most lawyers, their stock-in-trade is the law – not the delivery of their services.
The operations and IT professionals remain second class citizens in the legal world. Lawyers therefore risk extinction, he says, because ” they have failed to become integrated components in solving clients’ business challenges.”
They’re confronting issues – and issues with which lawyers need to not only grapple with now, but to do so with a sense of purpose – even desperation – if they are to survive and prosper.
>> Understanding the Future of Law Firms with Jordan Furlong
>> See – The Future of Law Firms