The future of law firms
Much has been written in the legal press recently about how the traditional legal market will be changed now that outside ownership and alternative business structures are allowed. Its my belief that these changes present both opportunities and threats to current firms, but regardless of these new competitors, the existing legal model can really thrive if new technology and working practices are embraced.
In this post I’ll go into ten of the characteristics that I predict will mark a successful legal practice in the future, although there will be some overlap between the different factors listed.
1. Paperless offices
By firms ensuring that all their work is stored electronically, a firm can have access to every bit of data within the practice at the push of a button which leads to efficient document and information management and hence huge administrative costs savings. Diary integration is simpler in a paperless office and lawyers can easily find out what is going on in every corner of the business.
Paperless firms can save a fortune on stationary as these is a much reduced need for files, wallets, staples, pens, pencils, correspondence clips etc. Along with reduced stationary costs, firms should have no archiving or physical storage costs, as well as a much lower need for secretarial services. This reduced administrative burden leads to lower rents required to house staff and physical documents, all without any reduction in a firm’s income.
2. Cloud computing
By adopting cloud computing even the smallest firm can enjoy the benefits of both extremely cheap data storage and faster, better performing IT systems.
All lawyers will be able to easily work remotely as all they will need to do is simply log in from their laptop (or even iPad) and as long as you have good broadband the entire office is at their fingertips as if they were at the physical office. There is also sophisticated off-site back up if computers go down without the law firm having to rely on their own outdated IT systems. Cloud subscriptions will include back-ups, upgrades and maintenance.
Cloud computing will mean that secure market leading software will be cheap and freely available for all. The following are examples of cloud systems that all firms can easily take advantage of: Mail Chimp email marketing, google docs, professional email accounts hosted by Microsoft’s cloud program, free cloud based accounting programs, web based contact databases and using storage space provided by big cloud infrastructure companies such as Microsoft and Amazon.
Firms should not be prevented from adopting cloud services because of any security concerns because it is far more likely that data would go missing from a laptop in the back of a car or a memory stick left on a train than from someone stealing data from a cloud.
3. Open plan offices
For retained lawyers based at a firm’s HQ, the traditional law firm structure of expensive partitioned offices with only two lawyers in each office, will be replaced by open plan layouts which not only introduce great cost savings but lead to much better communication internally.
4. Small is beautiful
As long as they’re smart and adopt new technologies, social media and improved business practices, small firms will grow in number as they find they can easily out-compete larger, more bureaucratic firms which have high overheads (principally in the form of expensive city centre offices and employees) and who find it harder to adopt new technology and match the client focus of a small firm.
5. Geographical dispersion
Particularly with the impact of online networking and cloud computing, the advantage of being based in an expensive city where there are large
physical clusters of people is rapidly declining. People and services are now commonly accessed online, so firms big and small will progressively leverage low cost locations at home and abroad to give themselves a significant advantage.
6. Social media
Most law firms are still in the dark about the impact of interactive web communication tools such as twitter, facebook and linkedin which will soon become the main way that networks and relationships are built and work is won. In short, clients will prefer to see how lawyers think, act and communicate online, rather than just rely on seeing the whites of their eyes in a physical meeting. Fee earners will be recruited to a large degree on the basis of their web and social media profiles, while the firm website will become increasingly irrelevant as individual lawyers produce their own more effective, advanced, engaging and authentic web properties.
Freemium works by offering a basic product or service free of charge while charging a premium for advanced features or services. It has become a common business model for Silicon Valley based companies. Smart law firms will adopt the freemium model as they take advantage of the amazing reach, search and publishing functionality of the internet to give away more and more quality free documents and advice on their sites in order to win both new clients and premium work.
Similarly, companies like DirectLaw will assist law firms in setting up well thought out online automated service delivery models whereby clients can pay through a firm’s website to access documents with the advice and assistance provided by software.
8. Corporate structures
Partnerships and LLPs will eventually start to disappear as law firms will incorporate in order to access outside finance, use share capital to reward employees, enable owners to enjoy limited liability and have a more streamlined hierarchy whereby decision making is left to a small board of directors. In short, the reasons why most businesses choose to incorporate will apply to law firms too. Successful firms will become more like brands, whereby they are run as a business rather than as a ‘profession’.
9. Value billing
The traditional time incurred basis of billing clients by the hour will soon become just one of a number of ways that successful firms choose to monetise their work. Firms will increasingly treat each client and their problem differently in terms of working out the most effective way to charge for their work. Fixed fees and success fees which give the client more cost certainty will become more popular, while clever law firms will find ways to charge clients that truly reflect the value solicitors add. The mindless and time consuming task of filling in detailed time sheets will become less common.
10. Self-employment and virtual law
Lawyers will increasingly want the freedom, flexibility, enjoyment and financial reward achieved by being self-employed, whether they go on to build their own firm or continue to work on a freelance basis for one or more law firms. The traditional partnership holy grail will no longer be attractive in a fast moving, connected world where technology makes it easier than ever to start your own business(es).
Lawyers will want greater control of their working life, of the nature of the work they do and the clients they act for. In large firms solicitors are asked to attend conference calls, meetings, away days, training and other events that seem to add no value yet soak up valuable time and energy. Rather than spend hours each week doing things at the request of the firm which individuals would avoid if given the choice, self-employed lawyers (and their clients) can escape over-management and stiffling bureaucracy.
Most lawyers and partners remain in a reward system that provides them with only about a third of the revenues they bring into the firm. Historically the benefits of working within a grand behemoth of a City law firm with all the trappings of support and success seem to have outweighed the disadvantage of giving away two thirds of the income you produce. However, times are changing…
Freelancing is growing in favour and ease of adoption. It represents a new wave of virtual law firms whereby self-employed solicitors earn as they work, being based wherever they want and using an existing firm’s administrative infrastructure (as well as assistant solictors if they need) in return for commonly retaining 75% of the revenues the lawyer makes from their own clients. In return for lower percentages, a freelance lawyer can also do work subcontracted to them from other firms and refer work the freelancer is unable to undertake themselves. If a solicit
or is confident in their ability the financial benefits are self-evident. A self-employed lawyer is also free to develop a powerful personal brand that will continue to attract ever more lucrative opportunities.
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Of course, the list of factors above can’t be exhaustive and there should be some areas where people will disagree with me, so I welcome any enlightening comments people may have below!