Is it Time to Rethink the Traditional Law Firm Business Model?

Law firms are navigating the competition, balance sheets, and a tough hiring market by adjusting work models and finding new ways to service clients — but is it enough?

The pandemic has brought the legal industry to a “tipping point,” to borrow a phrase recently popularized by Malcolm Gladwell. 

That’s the opinion supported in a recent report by Georgetown Law’s Center on Ethics and the Legal Profession and the Thomson Reuters Institute. The authors suggest 2020 may be looked back on as "an important inflection point for the redesign of the delivery of legal services on a broader scale." 

Traditionally, the legal industry is known to be resistant to change and risk-averse. But here’s why some experts believe it’s time to abandon those attitudes.  

The pandemic effect 

Since the Great Recession of 2008-2009, the legal market has been gravitating toward a different service delivery model. Driven by heightened client expectations, increased competition, and the need to cut costs, law firms began to adjust to “a new market reality” long before the great disruption of 2020. 

Post-2009, the legal sector experienced other change drivers such as advances in technology, increased regulatory scrutiny, and the wave of industry mergers and acquisitions following the Great Recession. In the years leading up to 2020, awareness of diversity, equity, and inclusion (DEI) issues, sexual harassment, and employee wellness also started a cultural shift within corporate America and the nation’s law firms. 

The COVID-19 pandemic had the unsettling effect of accelerating many of those changes even as some legal workplaces shuttered and the workload of many other lawyers slowed.

When remote work became necessary, many law firm leaders faced the consequences of the legal industry’s lagging adoption of the latest technologies. Law firms had to adapt quickly to “dramatic market changes,” and most did. Numerous IT upgrades previously relegated to the back burner were elevated to business necessities.  

The pandemic shone a bright light on issues of physical and mental health, work-life balance, and gender inequalities in the workplace. With a dispersed workforce, reinforcing a healthy organizational culture also became essential for maintaining morale, firm reputation, and attractiveness to future candidates. And the influx of a new generation of law school graduates after the turbulent summer of 2020 further challenged the notion of a return to pre-pandemic “normalcy.” This cohort of top-tier candidates can leverage the competitiveness of a tight hiring market to negotiate with potential employers. 

Many experts are asking if the traditional legal industry model has the flexibility to handle these disruptions. And the consensus is that many aspects of it need improvement.

The possible characteristics of a new law firm business model

The tight hiring market has highlighted the need for more flexible work options for lawyers now that the work-from-home genie is out of the bottle. Even hardline traditionalists find that the five-day, on-site work model may not continue as the standard, even if vaccine mandates are enforced, and the threat from COVID fades. 

The move to remote work also caused more widespread use of emerging technologies. Most firms now have expansive, cloud-based, secure networks that enable a wider variety of applications, including those using AI and blockchain.  

Some law firms are finding the “full-service” model to be unsustainable and unprofitable. Lawyers desiring a switch away from the lifestyle demands and pressures of “Biglaw” have been experimenting with either establishing private practices or banding with others in similar practice areas to create focused, “boutique” law firms in which they can exert more control over daily operations.

To maintain profitability, law firms are emphasizing cost containment through fundamental changes to their operations. For example, some legal leaders are using the switch to remote work (at least part-time) to cut down on office space; others are contracting non-legal services to third parties. In addition, the pandemic lockdown demonstrated the efficiency and practicality of virtual meetings. Thus, cutting down on non-essential travel makes sense for cost-saving and environmental reasons.  

Volatility provides the chance for a reset

There has never been a better opportunity for remaking a system, even if that system is still by most measures successful. 

And as with so many business-related topics, a discussion of sustainable law firm models comes down to the question of culture. The most successful business models must be built on a solid cultural foundation. If a law firm’s compensation models, DEI practices, and organizational values have not kept up with current demands, it’s time to make some changes. That’s what the future potential partner hires are telling legal leaders. In many cases, it’s time to listen.

Carrington Legal Search is celebrating 20 years in business: we were in the trenches with our clients during 9/11 and 2008. We partner with our clients to identify leaders and mission-critical talent to shore up and grow companies even during the most challenging times. We are here for you! To make our nationwide network work for you, get in touch at 512-627-7467 or email carrie@carringtonlegal.com.