Modern law firms expand and grow at breathtaking speed, empowered by surging demand and technology (regardless extreme obstacles such as a global pandemic, travel restrictions lockdowns and working from home).
The firms’ structures and business models, however, have changed marginally. The prevailing model is a partnership. Firms are managed by partners, who are typically excellent specialists in their respective practice area but often lack the managerial skillset and experience of professional business managers. Profits are distributed annually. It is telling that the most important metric remains Profit Per Partner. And that metric can and has been easily manipulated, say by support staff and associate layoffs, other cost-cutting measures, or (notably) periodic increases of the hourly rates charged to clients.
Long term objectives form the foundations and the distinctiveness of a law firm. Short term goals and results largely benefit, financially and socially, a few of the high ranking lawyers. Not their clients and colleagues. Change has been slow but the rise of a new generation of client companies to the top of the business world demands evolution or at least an adequate adjustment.
Change To Benefit of Our Clients
Law firms must be structured and conduct their business with a long term perspective. First and foremost, because this is in the best interest of their clients. Quarterly and yearly goals and results are to be aligned with longer term objectives that form the foundations and the competitive distinctiveness of the law firm.
The essence of the change includes:
- a shift from the short- and medium-term objectives to long-term objectives
- opening of the firms’ management to other professionals
- reforming the outdated pricing and the billing models and (mal)practices
- and, more generally, change must be directed at serving clients’ needs.
Innovate to Remain Relevant
Our view is fairly simple: change and innovation must serve firms’ clients, with their needs front and center.
Clients’ legal needs are most efficiently solved by collaboration. Collaboration on all levels: firm – client, firm – competitor firm – client (when firms sitting on a client’s panel collaborate and work jointly in teams), firm – competitor firm – in any area including joint training of associates and other staff with the objective better serving common clients’ needs.
Clients require deep understanding of their business goals, challenges and opportunities. The transactional nature of a law firm (where lawyers and teams jump from one client or mandate to the next with no time or incentive to develop deep understanding of the client and thus a long-term meaningful relationship) can no longer be a basis for a lasting partnership with the client in which both parties share expertise, knowledge and ultimately risks and rewards.
Clients want law firms to align their financial objectives (incl. budgets) with the clients’ own in a way that in every matter the law firm’s output/results will be rewarded/paid for (that is the positive result for the client, value added to the client project, costs saved, etc.) and not the time used – hours recorded and billed. Good lawyers should have learned to determine the value of their work, per project/matter, per type and complexity of work and so on.