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Defining the Law Firm of the Future

What will the law firm of the future look like? That was the question for a panel of general counsel, law firm partners and industry observers at a panel in New York City Thursday night. If there was consensus among them on any point -- and I'm not sure there was -- it was this: The firm that will thrive in the future is the firm that is able to deliver better value through innovation and technology.

The panel was hosted by LexisNexis to highlight its release of a survey on the state of the legal industry, which I recap in a separate post. D.M. Levine of The American Lawyer has already provided his report on the panel. It was moderated by Darryl Cross, vice president of client profitability at LexisNexis, and included:

All on the panel agreed that law firms should change how they do business. All did not agree, however, on what that change should look like. In fact, the one other point of consensus among the panelists may have been that there is no one-size-fits-all answer for firms or for clients. The legal industry is not a monolith, said Kalis, and any attempt to define it as such is a fallacy.

If change is to come, it should be through the mutual efforts of law firms and clients, several panelists said. The discussion should not about "us" and "them," said Sabatino, who is also a director of the Association of Corporate Counsel. "There should be synergy between clients and firms." Qwest's Baer agreed: "This isn't an adversarial situation between clients and firms."

Maybe not, but the panelists did not always see eye-to-eye. Some of the key points of discussion:

On law firm profitability: "I'm indifferent to the profitability of firms," said Helfer of Citigroup. "I care about what they charge and do for me." But how do companies measure the value of the legal services they receive? Qwest's Baer drew an analogy to the legal standard for judging obscenity: "We know value when we see it." Still, panelists said that data by which to measure value is hard to get and that both clients and firms need better measures.

On alternative fees: Clients, not firms, have been the greater barrier to adoption of alternative billing arrangements, panelists suggested. "We have met the enemy and it is us," said Sabatino. "In-house counsel have been horrible about promoting alternative fees." K&L Gates will generate 30 percent of its revenue this year from alternative fees, said Kalis, yet still finds that many clients staunchly oppose them. "Alternative fees are not a panacea," said Qwest's Baer. "They've been a train wreck for us. The real issue is how you truly measure value."

On law firm management: The legal industry has seen long-term change and pockets of true innovation, said Walsh of LexisNexis, but "fundamental innovation in the law firm model" is inhibited by poor management at some firms and a management model based on fractionalized leadership. "We are the only industry that is proud that it does not embrace change," remarked Baer.

On demand for legal services: The demand for legal services is declining, and law firms that have modeled their businesses on steady increases in demand need to adapt, argued Helfer. But Kalis of K&L Gates disagreed that demand will decline. "The prediction that the demand will be reduced is wishful thinking." The combined forces of globalization and government oversight create increasingly lawyer-intensive enterprises, he argued. That drives demand for lawyers with higher levels of knowledge and experience. Over time, the result will be a morphing of firms from their traditional pyramidal structures to diamond-like structures with greater depth of mid-level expertise.

On training of new lawyers: Consumers want better-trained lawyers, but they don't care where that training happens, as long as they don't foot the bill. Where training is most lacking is not in legal skills, but in interpersonal skills. Law schools and law firms both fall short in providing this training, all agreed, but they did not all agree on why. "The market does not reward interpersonal skills in law students, it rewards LSAT scores," said law professor Henderson. But schools could do more, he conceded. "We've got them for three years in law school, and all we teach them is law. We have an opportunity to emphasize skills in legal education."

On "procurement" of outside counsel: The insinuation of the procurement function into the hiring of outside firms destroys the ability of clients to develop trust and measure value, said Kalis. "The same people who buy toilet paper shouldn't be procuring law firms." But Baer of Qwest, while agreeing that it is the legal department's duty to evaluate outside firms, distinguished between "bespoke" legal work and more commoditized services. That drew a rebuke from Kalis: "If it is work worthy of lawyers, someone in the legal department has to own the hiring decision."

In a final "lightning round," moderator Cross asked the panelists, "In 2015, what will be different?" Their answers illustrated their divergent perspectives:

  • Baer: Law firms are smaller.
  • Kalis: Law firms are bigger.
  • Walsh: The core law firm model has changed.
  • Helfer: Firms are more entrepreneurial.
  • Henderson: Smaller firms will make more money.
  • Sabatino: Law firms are transparent and built on a model of trust.
  • Cunniff: Careers will be more customized.

Posted by Robert J. Ambrogi on December 8, 2009 at 12:08 PM | Permalink | Comments (4)

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