In recent years, law firms have experienced a pressure to innovate and adapt to an increasingly client-centric market. While there seems to be a willingness to invest and no shortage of cash, law firms seem hesitant when it comes to actually changing habits and implementing the new innovations that clients demand. Indeed, law firms often struggle to meet increasing customer expectations, and as part of that, often have a hard time demonstrating to clients the value in the solutions firms are offering.
As an answer to this widening gap, visionary firms have inserted a C-level management of nonlawyers to help the firm become more agile and adaptable. Interestingly, this development is not a symptom of the internal organization structure but rather a result of the firm’s lack of connection to its external environment.
Traditional law firms are known for being closed entities with solidified boundaries. They value segregation over inclusion in order to protect their knowledge. Firms are also aware that if they want to stay competitive in the customer-centric age, they will have to rearrange themselves in more radical formations. To meet client demands and regain trust, law firms must strategize for externalization, engage in collaborative ecosystems and replace their entrenched walls with flexible membranes that can absorb and extract talent and resources more seamlessly.
It is time for fluid law firms.
Background for the Future
Last year, Bain & Company published their brilliant analysis, “The Firm of the Future,” which offers an abundance of insightful predictions of what the next generation of successful companies will look like. A need for companies to value ecosystems over assets and to develop client intimacy were among their core principles. Law firms with closed boundaries will have a hard time meeting these principles.
Further, Bain’s research noted that CEOs face difficulty freeing up resources to mobilize against important challenges. They feel caught in a “resource-allocation doom loop that, despite best intentions, allocates next year’s resources more or less in line with this year’s revenue,” the report said. On top of that, the report also mentions that millennials tend to be skeptical about long-planned career paths and prefer freedom to stability. All of this paints traditional law firms as doom loops of trapped resources where assets are everything and employees are on decade-long career paths. Clearly, it also testifies to one hard fact: The modern firm must embrace flexibility and fluidity.
Fluid Law Firms
The core idea of the fluid law firm is to introduce fluidity to the boundaries of firms and make it easier to externalize and engage in the ecosystem in which the firm operates. A way to achieve fluidity, for example, is by replacing permanent employees with freelance professionals. Work will be project-based and executed in flexible units with permanent legal project managers that hire freelance lawyers to solve specific issues. In this way, the law firm has access to a wider circle of talent and a freer flow of knowledge.
A need for companies to value ecosystems over assets and to develop client intimacy were among their core principles. Law firms with closed boundaries will have a hard time meeting these principles.
Indeed, some law firms have already started to transform and balance the old ways with the new. Pinsent Masons, for example, launched their legal freelancer platform Vario as a model for externalization and expansion. And with the recent success of platform law firms like Atrium, the idea of relying on freelance legal professionals is not completely alien. Research by Hazlewoods shows that “the gig economy for lawyers continues to expand” with an increase of 29% in 2018.
For now, such platforms are only able to handle lower-skilled tasks that require few attorneys and digital products; however, we imagine the fluid law firm of the near future to be geared for large and complicated cases. Ideally, legal project managers would also handpick various digital solutions for each case. Forming partnerships with the relevant solution providers will naturally be extremely important.
A major benefit to the fluid law firm model is its full utilization of employees and its ability to hire specialized talent on a case-by-case basis. There are no attorneys waiting for new tasks, and no paralegals working in business areas in which they lack understanding. Clients also will benefit from receiving specialized legal advice, providing a project management approach that creates a better overview of the project and costs.
One law firm known for their focus in legal project management is the Danish law firm DAHL Advokatfirma. They have successfully applied a structure with project managers and interim teams consisting of both clients and attorneys. That has enabled the firm to attract larger clients and solve more complicated case matters related to business transitions and M&A. “Our clients are trained procurement managers who are used to purchasing professional consultancy services,” explains Anders Madsen Pedersen, DAHL’s commercial director. “They expect lawyers to step up and deliver with the same coordination and organization as consultants.”
DAHL’s strategy has been a huge success, growing its profits 30% over the past fiscal year. Using project management has strengthened DAHL’s brand as clients became more attached to the firm itself rather than the individual lawyer. Additionally, an increased ability to forecast and manage the projects has reduced pricing shock caused by lack of planning.
Our vision of the fluid law firm is radical, so we do not imagine that all law firms should want to include every part of it. On the other hand, there are no limits to what an expanded legal ecosystem could contain. However, we suggest that fluid firms engage:
- Digital Providers and Developers — A fluid law firm must have access to the best technologies available. Forming partnerships with solution providers will enable legal project managers to choose from a larger range of technological tools when solving cases. The firm can also include access to these solution providers in its offerings to clients. The software-as-a-service (SaaS) model is especially suitable for this because of its flexible setup and ability to share knowledge.
- Universities — Formalized collaborations with universities give the fluid law firm a direct line to prime research. Further, it is an entry to find raw talent among law, business and tech students, and engage these individuals through projects, competitions and mentorships.
- Legal Professionals — The fluid law firm’s ecosystem should engage, educate and gather various freelance professionals into a pool of talent and knowledge that legal project managers can leverage when working on larger cases.
- Clients — Having clients as part of the ecosystem is of prime importance in the customer-centric age. Engaging clients in the development of commoditized products and involving them in case matters where they might have insights will only strengthen and broaden the firm’s relationship with this vital constituency.
- Legal and Tech Start-Ups — Modern law firms often have economic capabilities within their organization, as well as an abundance of legal expertise and great office spaces, which make them excellent business incubators. Allowing start-ups a foothold within the firm provides access to novel technology while promoting innovation.
To engage the ecosystem, a firm could use seminars, after-work networking sessions, research projects, free office areas, open source development, corporate social responsibility (CSR) projects and so much more. If done right, an ecosystem would be a perfect marketing platform and give law firms access to prime legal talent, the best tech solutions, novel research and deeper client insights.
Perhaps the best benefit is that such an expanded ecosystem is a perfect way for the fluid law firm to build a customer-centric culture that increases client loyalty while simultaneously meeting their demands. Indeed, a more open structure would enable law firms to understand their clients better — an essential ingredient to regaining the declining trust in the legal industry.
This article was co-authored by Niels Martin Brøchner, CEO of Contractbook, a Copenhagen-based legal tech company that offers a contract management SaaS platform for midsize and large law firms.