The De-Lawyering of Law Firms

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[Excerpt from Law Is A Buyer’s Market: Building a Client-First Law Firm, published March 2017 by Jordan Furlong, a legal market analyst and consultant who forecasts the future development of the legal services environment:]

It’s not exactly a secret within the legal industry that lawyers aren’t the easiest assets to manage. As a general rule, they tend to be expensive, autonomous, difficult to lead, and prone to decamp to competing businesses without warning. The more experienced and expert the lawyer, the more these characteristics will manifest themselves. 

But lawyers are also the power source, the “engine room,” of the traditional law firm. Law firms’ ownership, profit-sharing, workflow, billing, compensation, governance, and culture all revolve around lawyers. Law firms’ naming conventions are based on the surnames of individual founding lawyers. Law firms go so far as to divide their personnel into two airtight categories: lawyers, and everybody else (a.k.a. “non-lawyers”). If a law firm’s lawyers don’t believe something is worth doing, the firm ain’t doing it. 

Lawyers, in other words, are absolutely essential to the traditional law firm — not just to the firm’s revenue and sales, but also to its very definition and identity. I suspect the only reason we say “law firm” rather than “lawyer firm” is to economize on syllables.

This model is now, however, slowly giving way to a new vision of law firms, one that revolves not around lawyers, but around the firm’s capacity to deliver services of value to clients. The new law firm’s “engine room” is not comprised of collected lawyers, but of collected legal expertise, applied to client needs through the use of systems, processes, technology, and expert professionals, as well as of lawyers. 

...law firms are discovering that they can provide some legal services to clients using only applied knowledge resources and technology. This is going to change everything.

A potent combination of advanced technology, powerful databases, sophisticated analytics, and streamlined procedures is enabling law firms to deliver solutions to clients without necessarily requiring the real-time application of lawyers’ efforts. Put differently, law firms are discovering that they can provide some legal services to clients using only applied knowledge resources and technology. This is going to change everything.

The Embedded Lawyer

AI methodologies that perform straightforward legal processes hundreds of times faster than the traditional use of human labor; fee-based online dashboards that help corporate clients navigate the financial regulatory landscape; powerful analytical tools that calculate potential client damages in class actions and proactively identify litigation risks. 

All these technology-powered products and services can be considered “productivity engines.” They enhance their user’s ability to complete a task or achieve a solution while reducing the amount of time and money required to reach that goal. They are going to populate and power the “engine rooms” of tomorrow’s law firms.

The new law firm’s “engine room” is not comprised of collected lawyers, but of collected legal expertise, applied to client needs...

These high-tech productivity engines share two characteristics. The first is that, yes, lawyers’ efforts and knowledge invariably contributed to their development. Expert systems, for example, require lawyers’ expertise to populate the databases and provide direction to the algorithms that will make decisions. 

But lawyers are not required to directly deploy their efforts and knowledge for clients’ use in real time. Their expertise has been distilled and “embedded” within the system, so that it can be applied over and over again, many times a day in many different locations by many different clients. Lawyers are needed at various stages to help build the systems that carry out this work. But lawyers are not needed to actually carry out the work themselves. Clients can access a lawyer’s expertise directly, alone, without having to call the lawyer up and set the timer running. 

The Information Imperative

The second characteristic shared by these productivity engines is that in almost every case, the core element of the offering is information: both legal knowledge and non-legal data, applied and leveraged by technology. Every law firm in the world possesses information, whether assembled in precedents kept inside servers and filing cabinets, stored up in libraries and online subscription services, or tucked away in the labyrinthine recesses of their lawyers’ brains. 

For law firms, information has always been a static resource, tapped when required but otherwise lying latent and dormant. The development of productivity engines is transforming that information into an active, dynamic resource, an asset that can provide value all on its own, without needing to be picked up and wielded by a human with a J.D. 

...in almost every case, the core element of the offering is information.

Up until now, to provide legal solutions of value to their clients, law firms could only deploy lawyers, or the occasional experienced clerk or paralegal. Today, however, firms can also unleash their information through advanced systems that can deliver answers and solutions. Several already do.

This means that for the first time, law firms have other resource options beyond lawyers alone for the development and delivery of value to clients. They can access, analyze, and apply information already prevalent in their systems or their markets. They can use this information to develop new business lines and generate viable income streams independent of lawyer activity. Legal information is widespread, can be accessed with relative ease, and doesn’t complain about partnership profits or threaten to join the law firm down the street. 

...the market will reward those firms that adopt these advances and punish those that resist.

De-Lawyering The Law Firm

What we’re witnessing, therefore, is the start of the gradual de-lawyering of law firms. So long as lawyers’ equity is still required to finance the capital and operations of a law firm, lawyers will still constitute a significant percentage of a law firm’s total personnel. But they will constitute a steadily diminishing percentage of the law firm’s revenue-generating assets and competitively significant personnel. Sources of law firm productivity and profitability, at one time a club exclusively open to lawyers, will start to include law librarians, legal knowledge engineers, legal data analysts, and legal productivity engines developed to harness the information the firm has assembled and applied. 

Why would law firms commit themselves to such a radical transformation of their businesses? Simply put, because the market will reward those firms that adopt these advances and punish those that resist. The firms that adopt and develop these productivity engines will be able to sell their services at a lower price without having to compromise on quality. It’ll be a simple matter of competitive mathematics.

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[For more information about Law Is A Buyer’s Market: Building a Client-First Law Firm or to order a copy, please visit law21.ca/books.]

 
 

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