Legal Trends in 2014

Trends of 2014The legal services industry may not be as static as it was for many years, but that doesn’t mean that trends and outcomes aren’t predictable. Three innovators in the legal services industry share their ideas about what the future holds.

Shifting focus: Why change will occur

Edwin Reeser, President of Edwin B. Reeser, A Professional Law Corporation, says, “To look at the future, look at the evolution over the last five years and carry it forward.” He elaborates to say, “We’ve seen law firms focus on efficiency, but not necessarily on effectiveness. As Peter Drucker said, ‘The last buggy-whip factory was no doubt a model of efficiency.’” Reeser says that “the large hunks of professional business being torn away from law firms and performed by LPOs and alternative vendors” aren’t going to come back to law firms, and that the appropriate response is for firms to improve their operating models.

Lexvista LLC Founder John Wallbillich says that more competition is on the horizon—for everyone. “Law firms are going to find their services judged to a more global—and more exacting—standard.” He says the key is for lawyers to shift their focus from the immediate client to the ultimate client: “The legal industry doesn’t exist in a vacuum; it’s a service industry defined by the needs of clients who are dealing with demanding customers. Delivering legal services in a more efficient and timely manner makes the client’s pursuit of the ultimate customer more competitive.”

Jeffrey Carr, Senior Vice President, General Counsel and Secretary of FMC Technologies, says that “broad sections of the market have crossed the tipping point even if a lot of people don’t realize that. A lot of legal work is commoditized or standardized and need not be done by lawyers at all. That said, there’s a lot of resistance to change.” He sees the change as inevitable and the resistance to that change as the “tectonic forces meeting one another”—which means that “over the next several years, we’ll see already occurring trends continue, such as the disaggregation and redistribution of work, the shift from big firms to smaller and regional firms, as well as the performance of legal-related tasks by non-lawyers.”

BigLaw and the future for mid-size and boutique firms

Though Reeser imagines that “certain aspects of BigLaw are going to continue pretty much as they do now” in the next year, he also says that firms need to respond to the pressure from sophisticated customers to get better outcomes. “Law firms are being pressed to do better work for less money. The short-term fixes we’ve seen—like the de-equitization of partners to maintain profit levels—aren’t sustainable,” Reeser says.

Above the Law contributor David Lat recently wrote about BigLaw hiring trends: Greenberg Traurig, Kilpatrick Stockton, and Orrick “ha[ve] created some new non-partnership-track attorney positions [that] pay less than traditional partnership-track…positions, but the billable-hour requirements are lower and the training is better.” Lat writes, “This might be the future of BigLaw….”

Reeser predicts two changes in the structures of firms: “More boutique firms will be formed. Certain firms with lower rate structures, such as IP firms, labor and employment, government contracting, and health care practices, will break off.” And, on the flip side, “Small boutique firms with a strong high-rate clientele will be absorbed into larger firms because succession is difficult to plan in the boutique environment. There comes a time in this kind of firm’s life cycle where merging makes a lot of business sense.”

David Galbenski, Founder & EVP of Strategic Initiatives at Lumen Legal, points to the recent trend reported on in the Wall Street Journal, that demonstrates a shift toward the use of mid-size firms for big-ticket litigation. The 2013 CounselLink Enterprise Legal Management Trends Report shows growth in mid-size firms—“…the share of U.S. legal fees paid by clients has grown from 18% three years ago…to 22% in the trailing 12 months that led ended June 30, 2013” while “…the ‘Largest 50’ has gone in the opposite direction—dropping from 26% to 20% over the same period.” The same study found that mid-size firms “billed nearly twice as much [as the Largest 50] under alternative fee arrangements.” Galbenski says we can expect these trends to continue to grow in the coming year.

Category killer

Carr says “what’s happening now is not changing the fundamental nature of the delivery of legal services; it’s labor or process arbitrage to keep costs down.” He believes there will be “new entrants on the scene with completely different business models or platforms: a category killer.”

He sees the industry evolving toward an entirely different approach to legal services. “Much of what lawyers do today doesn’t require a law degree. In my perfect world,” Carr says, “lawyers would concentrate on the work that requires their judgment through counseling: risk identification and mitigation.” But, because the legal industry is built on hours, process and content have been its focus. “We have to reinvent ourselves to be proactive,” he says, mentioning a tool his department at FMC Technologies uses to harvest information, repurposing it for use in internal investigations or to identify risk areas, rather than for its intended use during litigation.

Technology’s role

Technology will continue to play a role, Reeser says: “Because your library is no longer an investment that costs so much to buy and maintain,” it has evened the playing field. “If you’ve got a small team of highly intelligent and hard-working people, they can produce the same product that a large law firm can. The advantages of size no longer exist.” Reeser uses Bartlit Beck to illustrate his point. “They go up against the best in the world with fewer lawyers on the case and win.”

Wallbillich agrees that law firm size will matter less to corporations, saying, “Increasingly, clients will look to the lawyer leading a key team first, not the firm. Technology can sometimes be adopted faster by smaller and midsize firms, which can mean a more competitive economic environment for the client.”

Carr says the “deployment of technology facilitates commoditization—but it won’t replace judgment. It will replace hours, but will be resisted because it challenges the way law firms and even in-house lawyers define their value.” As a result, he says, the leaders of the in-house community will not only have to lead the charge toward embracing technology, they must insist on change.

Wallbillich also suggests that technology could impact continuing legal education, extending its focus beyond “what the law is” to “how lawyers should work.  Forward-thinking lawyers who want a competitive edge need to develop better business-related skills.” He says that “a two-day conference held in a resort” isn’t always the best way to introduce and reinforce new skills. “I expect that we will see more learning options for lawyers that will be delivered through desktop or mobile applications, on-demand when and where the lawyer needs them.”

“There’s always room for excellence,” Reeser says, calling the next five years “exciting—we’ll see a lot of innovation and effort to improve. There will continue to be experimentation in differing platforms in delivering legal services. We’ll see a lot of new ventures; some will succeed and some won’t. But there will be a lot of people who get it right.”

If you’d like to read more about what the future holds, download the Kindle version of our Founder’s new book Legal Visionaries for free from Amazon.com on November 7 and 8, 2013.

 

Reach out to the Lumen team.

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