The evolution of the legal services market: Stage 5

In the four previous entries in this series, I’ve sketched out what I see as the decline and subsequent rise of the legal profession over the next 10-15 years as a direct effect of rapid evolution in the legal market.

My fundamental premise throughout these posts has been that the emergence of new competitors and new technology, along with regulatory reform, will deprive lawyers of many of the low- to medium-value tasks they perform today, but that this change will also expand and reconfigure the overall market for legal services in ways that eventually drive a resurgence in lawyer employment and the more valuable applications of our skills. This will be a roller-coaster ride, not just for lawyers but for all the industries, organizations and suppliers that grew up around our profession during its 20th-century heyday.

Today’s final entry is kind of a postscript to Stage 4, and maybe something of a thought experiment too. I’d like the legal profession to start thinking more creatively and laterally about exactly what lawyers could be in the future.

Stage Five: The Multi-Dimensional Market

Lawyers, contrary to popular belief, are highly creative and innovative — but only on behalf of our clients. When we turn the focus on ourselves and our own profession, we seem to lose our creativity and ambition — we narrow our vision, think small, and cling to “what we’ve always done.” Almost all the discussion of lawyers’ economic prospects (and there’s plenty in the news every day) proceeds on the assumption that lawyers only perform a limited number of strictly defined functions, a slim portfolio of roles that has hardly changed at all for decades.

We cast our careers in linear terms, and we only see change of the negative kind — work that we lose to others. We don’t think about work that we could take from others, or work that we could create altogether new. We don’t give ourselves enough credit for what we could be and what we could do.

Recall what happened to accountants when the first wave of technological advancements in the 1970s and 1980s rendered many of their traditional balance-sheet offerings obsolete. They were faced with a stark choice: evolve upwards and outwards, or fade away into history. They chose to evolve, reinventing themselves as business advisors, market analysts and process consultants — tasks for which they were certainly not educated and for which they could claim no special pedigree. They reached for this work because (a) they needed it, (b) nobody else was doing it, and (c) their core skills and competencies qualified them to at least try it. And they succeeded, in no small part because they thought they could.

A simular choice is at hand for lawyers: move up the value ladder, or climb off it altogether. Many lawyers today make a living off the legal equivalent of  accountants’ “balance-sheet” work; that work, as I hope this week’s series has persuasively argued, is going away. What will replace it? Where will we find new engagements of similar or greater value?

Answering those questions is a two-stage process. The first stage is the hardest: it involves screwing up our courage, building up our confidence, and letting our imaginations roam over the possibilities of 21st-century lawyering. It requires lateral thinking and creative brainstorming, anchored by a clear-eyed assessment of both our own strengths as professionals and the evolving needs of a globalized society. Once we’ve done that, once we’ve cleared that enormous (for us) hurdle, then the second stage is not only easy — it’s almost fun. What could we do? What might we be? There’s a vast, uncharted and unclaimed territory out there — what could we build on that new landscape?

Stage 5 of the evolution of the legal market is the only one in which lawyers are the ones bringing the change. In all four previous stages, we’ve either been helpless bystanders or market responders; in this era, we get to make the first moves. This era might very well overlap with Stage 4, and it’s possible we could see some early examples even in Stage 3 — but it’s all up to us.

Stage 5, if and when it happens, is when lawyers reinvent themselves. We evolve beyond our long-standing self-identification as document approvers, transaction facilitators, and dispute resolution shepherds. We saw our traditional inventory taken away by competitors, so we seek out new functions, new social and business purposes.

This process begins when we return to our roots. Lawyers will ask, of themselves and each other: Why do people turn to us?  What do we bring to the table? With which traits and skills are we associated, and for which of these are we most valued? What do we offer that matters in an interconnected, unstable, and hopelessly complicated world? Here are some of the answers we’ll come up with:

  • Accuracy
  • Analysis
  • Authority
  • Calmness
  • Communication
  • Connectivity
  • Creativity
  • Drawing Distinctions
  • Facilitation
  • Fairness
  • Honesty
  • Independence
  • Logical Reasoning
  • Order
  • Pattern Recognition
  • Persuasion
  • Representation
  • Rigour
  • Rules
  • Solutions

When we finish assembling this list and test-driving it with our clients, we then ask: to what new roles and positions could these characteristics and values lend themselves? We know what we used to do in the past; what might we do in the future? Here are some possible answers.

  • “Amazon.Law” Provider: Sharp, focused, legally trained mind sifting through and analyzing clients’ vast storehouses of data to anticipate legal needs they don’t even realize they have.
  • Civics Trainer: Roving instructor retained to inculcate the rule of law, rights and responsibilities, and other fundamental legal principles to students, employees and citizens.
  • Competitive Analyst: Provider of sophisticated business intelligence operations, infused with deep knowledge of laws and regulations and employing rigorous organizational analytics.
  • Freelance Fact-Checker: Trusted independent authority retained by governments, media and organizations to reliably separate fact from fiction in a truth-challenged society.
  • Judicial Subcontractor: Dispute resolution expert deputized by judges to go out and “bring courts to the community,” increasing access to justice and clearing court backlogs.
  • Mobile Arbiter: Conflict resolution facilitator called in to troubleshoot everyday disputes at homes or in the workplace before they become full-blown fights: “preventive ADR” on a moment’s notice.
  • Social Connector: Using deep networks that range across business, government and private individuals, connecting people, organizations, ideas and initiatives that will complement each other, solve problems, and create opportunities.

These seven possible legal careers of the future complement seven that I suggested in a post earlier this year. You can come up with more, if you open your mind to the possibilities on offer.

Where do you start? Go ask your best clients what they think — but don’t ask them about “lawyer of the future” jobs, because they won’t be able to tell you. Henry Ford famously said that if he’d asked his customers what they wanted, they’d have told him “faster horses.” Instead, ask your clients: what do you value about me, and about lawyers generally? What do we have that inspires your confidence and fulfills your hopes? What needs do you have, even subconsciously, that no one has offered to meet? If you had all the time and money and information you needed, what would you set out to create? Help them envision their own future, and then find ways to get them there.

The near-term and mid-term future of the legal profession will be largely dictated by external forces. But throughout that process, and especially as we draw towards the end of that period of upheaval, we will gain growing amounts of control — not just over our own destiny, but also over the future course of the entire legal market and of the whole definition of what we mean by “legal” and “lawyer.” Stage 5 will mark the end of the legal market’s evolution — but for the legal profession’s own evolution, it will be just the beginning.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

The evolution of the legal services market: Stage 4

This series hasn’t exactly been a joyride so far, has it? Following the complacent satisfaction of Stage 1, the legal profession is not currently enjoying Stage 2 and will be even less fond of what Stage 3 is likely to inflict. You can be forgiven if this feels like a movie you’d like to leave halfway through. But while this might seem to be a depressing tale of lawyers’ relentless decline and eventual extinction, that’s not the actual story.

Lawyers, we need to keep in mind, really matter. We serve critical functions in society: we provide dispassionate representation and advocacy in dispute resolution; we facilitate countless significant social and business transactions; and we’re capable of providing tremendous and unique value to clients of all stripes — value that commands a premium price. Law, along with medicine and ministry, are the three original professions: the highly esteemed servants of the community and the building blocks of a meaningful and civilized society. No one is going to outsource or automate a way around that.

It’s my belief that, as a profession, we’ve lost sight of these facts. We’ve been distracted by the easy money to be made through providing essentially clerical tasks and conducting low- or middling-value transactions — tasks that we took on simply because the market lacked other providers whose skills and sophistication were better aligned with this kind of work. Our monopoly on the legal market narrowed our vision, fogged up our priorities, and misdirected our talents. We became myopic and even selfish, believing that we were entitled to exclusive access to any work that was law-related.

I think that lawyers in the future will, in a strange way, come to appreciate that the disruptive forces currently sowing chaos in our lives actually did us a favour. By taking away work that doesn’t require our expertise, they’ll prevent us from punching below our weight and force us to go pick on challenges our own size. Not only that, but by breaking through the pricing floor and lowering the financial threshold for consumer access to the law, they’ll do something lawyers have never been able to do: they’re going to grow the legal market.

By the time Stage 4 comes about — and I believe parts of it could start emerging during Phase 3 — lawyers will be surprised and delighted to see a much larger and more dynamic market emerge. And in those circumstances, we won’t really mind having more people digging into what will have become a much bigger pie.

Stage Four: The Expanding Market


(a) The Market:

  • Combination of multiple providers and affordable prices opens up huge, previously latent legal market.
  • Innovation in legal services, driven now by both lawyer and non-lawyer providers, greatly increases range and depth of accessible legal work.
  • Market expansion accelerates rapidly; legal job growth returns, demand for lawyers increases (although not often in traditional roles).
  • Systems and IT advances achieve unprecedented levels of accuracy and efficiency in basic legal documents and processes.
  • Routine and straightforward legal work is subject to fierce competition by warring national and global franchises, including legal publishers, accounting firms, software companies, and even a few “white label” law firms.
  • Commoditization of legal product is widespread; industry norms and standards are established for basic products and services.
  • Concept of “legal insurance” becomes more commonplace, often as part of homeowners’ policies or corporate benefits, creating more legal opportunities.
  • A new legal service ecosystem grows up, one in which individual lawyers and non-lawyers temporarily collaborate on projects under the direction of senior project-managing counsel.
  • Civil court system is transformed into smaller but more prestigious entity, with lawyers and judges handling complex, high-stakes, or socially significant civil disputes; parallel “private” courts and ODR providers oversee adjudication and resolution of other civil matters.

(b) Lawyers:

  • Elite law firms, from solos to global giants, thrive by handling high-quality, highly remunerative, mission-critical work: they are strategists, counsellors, and trusted advisors to individuals, businesses and institutions.
  • “Preventive law” emerges as a viable legal career: managing risk and avoiding legal troubles for corporate and consumer clients on a monthly retainer.
  • Lawyers become increasingly integrated within diverse corporate and social enterprises; higher evolution of “in-house” lawyers.
  • Just three types of “outside counsel” dominate the private bar: mobile virtual solo, boutique specialist, and global corporate problem-solver and value-provider.
  • New lawyer organizations evolve, replacing the associations of the past, using online platforms to create fluid, collaborative, job-sharing, skill-building networks.
  • Legal education is transformed by emergence of “specialist” law programs focusing on specific industries and “bridge” providers linking formal education with practical training. Online legal education becomes ubiquitous.
  • A few elite lawyers continue to bill by the hour, the last holdouts in a market where pricing is almost entirely predictable, cost-aligned, value-based and market-driven.

Era: 2019-?

Every period of creative destruction comes to an end; every process of renewal eventually completes itself. After many difficult years of contraction and frustration, lawyers finally see a change in their fortunes.

By Stage 4, the ongoing process of competition and innovation has greatly reduced the internal cost and external price of many legal products and services. Lawyers who had been bemoaning this trend are happily introduced to the economic principle that lower prices expand markets. More people and businesses can now afford more legal services than they could before: the latent legal market is finally cracked. Moreover, thanks to the attrition of the past few brutal years, the number of lawyers in the profession is much reduced, setting up a new supply-and-demand dynamic.

Only a handful of companies worldwide now provide legal knowledge, documents and processes, and like the Amazons and FedExes and Wal-Marts of the past, they rely on extreme efficiency, standardized production, cutthroat pricing and just-in-time delivery to compete for market share. No 20th-century law firm could survive in this market, and few 21st-century lawyers want to do this work anyway. They have other, better pursuits.

This is where lawyers see their resurgence. As Clayton Christensen points out, efficiency innovations destroy jobs, whereas truly disruptive innovations create jobs. Stages 2 and 3 gave us “efficiency innovations” in law, at the cost of many lawyer positions; but Stages 3 and 4 usher in the “disruptive innovation” era, during which lawyer employment opportunities return, stronger than before. Preventive law — Richard Susskind’s famous “fence at the top of a cliff, rather than an ambulance at the bottom” — is an excellent illustration of this trend: proactive lawyering that manages risk and reduces problems discovers its market value.

High-level, highly demanding and highly compensated legal work experiences a renaissance in this era. The world has gotten no simpler in the last 10 years — in many ways, it has become far more complex and confusing. Anonymity and relativism undermine social and business bonds, technology and big data create powerful and frightening new social forces, shades of grey are everywhere in public and private life. The authority, clarity and precision of lawyers now become a necessary and valuable presence in the market. Freed from our previous dependence on paper and product, we return to our higher purpose and our more valuable business and social roles.

The industries and specialties that grew up around the old legal profession undergo similar transformations in Stage 4. Lawyer associations survive by becoming lighter, quicker, more businesslike and more aspirational, representing lawyers’ newly redefined interests and repositioning themselves as networkers, connecters, trainers, R&D providers and thought leaders. Legal education is still uneasily re-engineering itself, but a new balance is emerging between educators focused on classical jurisprudence and legal philosophy and trainers focused on professionalism, ethics and business acumen for both initial and continuing professional development. Legal publishers have become legal software developers and knowledge management engineers.  Everyone has had the opportunity either to raise their game or leave the playing field altogether.

A word about litigation. I gave a presentation earlier this year to Canada’s chief judges and chief justices, wherein I advised that their traditional role as private dispute adjudicators was at risk. The soaring costs of court litigation, in terms of both time and money, had placed it out of most people’s reach and had encouraged the development of less formal but more accessible dispute resolution providers. I expect that the majority of disputes currently pushed through the court system will eventually be privately resolved (and perhaps even privately enforced, although I’d prefer to see the state continue in that role). The civil justice system may simply be too big and too brittle to survive the change to a new legal marketplace.

Civil litigators, in turn, will have to adapt to a market in which the traditional sources of litigation revenue are routed out of the legal profession (towards e-discovery providers, game-theory bargaining systems, data-crunching prediction systems, etc.). Lawyers’ competitive strengths in dispute resolution reside in negotiation and advocacy skills, especially the latter; these are what make great “trial lawyers.” There will be a role for skilled barristers, perhaps as advocates in the traditional court system, perhaps as adjudicators in new private court systems. I expect there will be, on a volume basis, less civil litigation work, but it will be more demanding and fulfilling work of higher quality, and it will pay more handsomely than all the endless hourly-billed tennis matches that now bog down our courts.

It’s quite possible that Stage 3 painted too dark a picture of lawyers’ position, and that Stage 4 paints too brightly. Certainly, what I’m outlining here are the most positive outcomes for everyone — lawyers, non-lawyers, and most of all, clients. There are bound to be stumbles, breakdowns and various crises — revolutions rarely deliver a universally happy ending and they rarely wind up where the first revolutionaries intended. But what I do believe is that this future is possible and plausible — and if things break right and the market responds rationally, even likely. We’ll need luck and leadership, to be sure — but then, when haven’t we needed those things on our side?

I have one more post in mind for this series, Stage 5. Like Stage 4, it could run concurrently with other stages, and it could arguably be considered part of this legal market expansion period. But there are elements of it that deserve more attention than today’s entry can accommodate. It goes beyond expansion, all the way to transformation.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

The evolution of the legal services market: Stage 3

In the first two parts of this series, we looked at the traditional legal marketplace that held sway for many decades and the current disruption in the market caused by new technology, new competition and new regulation. Today I want to extend the time horizon a few more years and suggest what Stage 3 of the market’s evolution will look like.

Stage Three: The Fully Open Market


(a) The Market:

  • Multiple legitimate providers now fully active in legal market. Lawyers battling many competitors for market share.
  • Regulatory reform eventually sweeps away most remaining barriers to competition; only a small, high-value portion of legal work is reserved exclusively to lawyers.
  • Legal knowledge and tools are almost universally available and adaptable through the internet. Emergence of first industry standards in these areas.
  • Many consumer legal services shift from lawyers to non-lawyer providers; closure of numerous solo and small-firm law practices that cannot adapt.
  • Much corporate/institutional legal work shifts from law firms to non-firm providers; most midsize and large law firms downsize dramatically, some close.
  • Extreme efficiency: systems and software take on most paper, process and product work, plus growing amount of legal reasoning and analysis work.
  • “Non-lawyers” evolve rapidly to fill in new gaps in the market and serve clients directly; development and enforcement of non-lawyer standards and protocols.
  • Competition drives systemic improvements. Both surviving law firms and new legal enterprises make routine use of outsourcing, unbundling, software, project management, etc.
  • Golden age of legal technology: unprecedented volume and breadth of both individual and enterprise applications disrupt even innovative law firms.
  • Client access to legal services has never been greater. Prices for most services drop to their lowest levels in recent memory, some to true commodity levels ($0).

(b) Lawyers:

  • Growth of the legal profession stalls, then reverses for the first time in memory.
  • Traditional volume-based lawyer organizations (bar groups, publishers, CLE providers, etc.) either radically reinvent themselves or close.
  • Substantial number of law schools close or dramatically downsize; many adopt practical training offerings to compete for new students or serve practicing lawyers.
  • Lawyer self-governance survives, albeit with stricter standards for admission, discipline, and continuing competence.
  • Lawyer governance of the legal market comes to an end; governments or government agencies take over legal services regulation.
  • Legal jobs do disappear, even from outsourced destinations. Machines and systems partially or fully displace many lawyers from tasks they have traditionally performed.
  • The first new solo and small-firm practices begin to emerge: mobile, virtual, highly specialized, systematized, collaborative, and project-based.
  • The first truly global legal providers emerge on a scale not seen before (10,000+ employees, lawyers and non-lawyers). Massive law firm merger activity.

Era: 2016-2024

This stage is the logical conclusion of the period of creative destruction that began in Stage 2. The legal market is long overdue for some serious disruption, and much of this pent-up activity should be released late this decade and early next. Again, the key elements driving change are the lowering of barriers to non-lawyer ownership capital and competition, and the explosion of technology that displaces, or occasionally fully replaces, lawyers. Incumbents will have a hard time of it.

There is a steep price to be paid by lawyers during this period of market evolution: work that we had always assumed was within our exclusive bailiwick falls increasingly to providers outside our profession. Lawyers feel under siege on all sides, unable to rely on traditional defences supplied by governing bodies (many of which no longer regulate the market) and bar associations (many of which will lose critical masses of members and be unable to perform traditional professional advocacy functions). Many lawyers find themselves adrift in the market, in search of a purpose: what value do we provide? What tasks will pay the rent? Lawyers who graduated into the chaos of the 2010s are especially hard-pressed. This is one of the major factors that will drive an eventual widespread forgiveness of law school debt (part of a society-wide student debt forgiveness movement).

This is probably the nadir of lawyer employment, and there is much talk of a “lost generation” of lawyers who enrolled in law school just as Stage 1 was drawing to a close. In Stage 2, law firms downsized, but at least there were opportunities for contract work or entry-level tasks with LPOs or other low-cost providers. During Stage 3, however, even many of those jobs disappear into algorithms, software packages and artificially intelligent online programs. In addition, for reasons of both advancing age and shrinking opportunities, the Boomer generation finally departs the scene. The result, over time, is a smaller legal profession.

By this point in the market’s evolution, the supply curve has responded to the change in demand: law school enrolment is a shadow of its former volume, and schools are forced either to severely reduce their class sizes, merge with other faculties, or, in many cases, simply close their doors. This period sees the emergence of “non-school” legal education providers: private corporations that buy struggling law schools from their universities and turn them into training centers for both pre- and post-call lawyers, absorbing many CLE providers along the way.

The news is not all grim for lawyers. Stage 3 also gives us the first signs of the new law firm world — mobile virtual solos and streamlined mega-firms, to name two of the first species to emerge.

“Sole practice” has long been virtually synonymous with “general practice,” but solos in this era develop niche practices and hone unique skills in order to serve very specific markets over a wide geographic area. Small law firms also collaborate extensively with other solo and small practices, often coordinated by a  “general contractor” who assembles mix-and-match teams of solo specialists for specific one-off projects. What was once referred to as “general practice” work is more often the purview of large corporate entities that employ both lawyers and non-lawyers (criminal defence work remains the exception: matters of life and liberty still belong to lawyers).

Large law firms also adapt to the new ecosystem. The generic national or international “one size fits all” full-service firm is largely a thing of the past. Successful mega-firms are now truly gargantuan, growing to levels that make even the Big 4 accounting firms take notice. They are certainly not partnerships, vulnerable to the whims of powerful individual lawyers; they are businesses whose employees (many lawyers, but not all) support a defined culture of expectations and performance and adhere strictly to systems and management designed to maximize productivity and minimize waste. Super-boutiques also emerge to dominate particular practice or industry areas, also with a strong corporate infrastructure. Lawyers do not just lose control over the legal market; increasingly, they lose control within law firms.

The end of lawyers’ monopoly over legal services comes as something of a shock to everyone. This is not an easy or a clean transition: regulatory oversight of non-lawyer providers struggles in its early years, and there are some notable scandals whereby clients are systematically abused by unscrupulous providers. Many lawyers cannot resist the temptation to say “I told you so” when professional standards are seen to slip.

Significantly, however, despite some high-profile incidents of malfeasance among non-lawyer providers and the predictable failures of some ABSs, the new market dynamics work well. Regulation of the legal market hits its stride. Consumers of legal services, offered more choices, also become better-informed and more sophisticated. Lawyers, freed from paperwork, focus on higher-value tasks that better engage their talents. More people have more access to legal services appropriately aligned to their circumstances than ever before.

Once again, the dates suggested for this era are mostly guesswork. The real question is timing: How long will lawyers be able to maintain ring-fenced protection of the legal services market from outside intervention? The longer we can hold out, the longer this process will take, and it could be delayed for several years beyond this estimated timeline. But the end result will be the same. The “non-lawyer” genie is out of the bottle and it is not going back in.

But just as importantly, the world is not standing still while all this happens. Years of slow growth will come to a sudden end with a roar of renewed economic activity towards the end of this decade. Lawyers have not been idle, simply standing in the middle of the road waiting to be run over; they have been adapting as well.  These fallow years, as we’ll see in tomorrow’s instalment, are also setting the stage for the dynamic legal market and resurgent legal profession to come.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

The evolution of the legal services market: Stage 2

In yesterday’s entry, we painted a portrait of a closed legal marketplace long dominated by lawyers, and we considered the positive and negative results of that state of affairs. Today, in the second of five stages of legal market evolution, we’ll look at current events and forecast the likeliest path those events will take in the immediate future.

Stage 2: The Breached Market

  • Macro-economic upheaval shatters previous steady state of legal market.
  • Legal work, formerly indivisible, starts breaking into mission-critical, ordinary and commodity tranches.
  • Multiple new providers enter legal industry, aiming at second and third tranches of legal services; legal work starts to leave law firms and go to these new providers.
  • Growing access to legal knowledge enables more “do-it-yourself” law among consumer law clients.
  • New options and financial pressures spur both insourcing and outsourcing of legal tasks by corporate law clients.
  • Lawyers find they have limited regulatory options against emerging competitors, which become legitimized and start to mature.
  • Prices for lawyers’ services fall; in absence of workflow innovation or infrastructure improvements, lawyers’ costs continue to rise; ergo, lawyer profits stall out or decline.
  • Law firms cut positions to preserve profits; employment rates for new lawyers plummet; pool of unattached legal talent grows.
  • Legal technology becomes more disruptive, displacing lawyers from traditional roles.
  • Law schools start to experience pressure from lower enrollment, tuition resistance, extreme bad publicity.
  • In some jurisdictions, lawyers lose power to regulate the legal market and/or themselves (most notably England & Wales).
  • Lawyer jobs, for the most part, do not disappear; they relocate (to small centers, non-lawyer companies, India). Movement, not elimination, of labour.

Era: 2008-2016

This is more or less where we find ourselves today. The end of the Boom And Bubble Era (roughly 1985-2008) creates a lengthy period of de-leveraging and tepid economic growth that (a) forces clients to cut back on legal spending generally and (b) gives them the opportunity and ammunition to renegotiate terms with their legal service providers. In some respects, clients become lawyers’ main competitors: by keeping work in-house or doing it themselves, they deprive lawyers of a previously steady supply of activity and revenue.

Simultaneously, rapid technological advances (especially online) lower barriers and create numerous entry points into the market for providers previously unable to access legal customers. Lawyers find it difficult to battle these new competitors, in two ways.

First, as market regulators and UPL enforcers, we find ourselves stymied by the unconventional nature of new providers. Some are based outside our physical jurisdiction (LPOs), some are arguably not “practising law” (e-discovery providers), and some meet latent market needs to an extent that we might find politically risky to shut down entirely (LegalZoom). Mostly, though, there are just too many new entities to deal with all at once. It was one thing for a regulator with limited funds to prosecute a single paralegal or self-help publisher at a time; it proves another to take on entire, multi-jurisdictional, investor-powered industries.

Secondly, as practitioners, we suddenly recognize a wide range of vulnerabilities in our businesses. Our internal inefficiencies bloat our costs and therefore (thanks to our cost-plus business model) our pricing; our new rivals use streamlined operations and low overheads to undercut our prices and still turn a profit. Our rigid business models keep us from embracing online service delivery or 24/7 availability; our high-tech competitors make these two features the foundation of their market strategies. After watching us and looking for weaknesses to exploit, the new providers move into our traditional market space; we lack the ability to respond aggressively.

Together, these two forces — a decline in overall legal spend and innovative new options for legal services — combine to reduce demand for the services of lawyers. This is not a monolithic process: some areas of law are hardly affected at all during this time, while others are slowly eviscerated. The change also takes effect at different times in different jurisdictions, making it difficult to discern big-picture trends from isolated events. Many lawyers continue to believe that “this won’t affect me,” “this is just the recession” and “things will soon be back to normal.” But even those lawyers who understand the new market dynamics find it hard to change long-established habits.

Declining demand for lawyers rapidly leads to over-capacity in law firms, which in turn leads to falling lawyer employment rates, especially among unskilled new graduates. Simultaneously, at the other end of the generational spectrum, the economic difficulties of the past several years encourage many older lawyers to delay retirement and keep working for as long as they can. This one-two punch produces a large and growing pool of unemployed and underemployed lawyers, downward pressure on lawyer incomes (especially among inexperienced practitioners), and succession crises at law firms in which senior partners who control client relationships grip the reins of power ever tighter.

This era marks the beginning of the end of the traditional “BigLaw” business model, whose fundamental premises prove incompatible with emerging market realities. Many large firms find themselves trapped by two opposing forces: cash crises brought on by lower effective rates and declining business, and confidence crises brought on by flat or falling PPP numbers and the pressure of actual or anticipated rainmaker defections. Several very large firms fail to make it through this crucible.

The legal education crisis also traces its origins to this period: decades of strategic somnolence by law schools, combined with a popular belief that these institutions have been gouging their students and given them worthless degrees in return, creates serious blowback for schools and helps push down law school application rates. By the close of Stage 2, several law schools find themselves in more dire circumstances than they could have imagined a few short years ago, and as with their BigLaw buyers, some do not survive the crisis.

The most important development of this period, however, is the arrival in 2012 of Alternative Business Structures: non-lawyer ownership and capital in legal enterprises in England & Wales (building upon Australia’s trailblazing efforts a decade earlier). Starting with the consumer market, but eventually spreading to corporate and institutional work as well, new participants find willing buyers for their products and services. This development, while spawning the usual troubles of any startup industry, does not produce the widespread disastrous impact on professionalism and the public interest that some had predicted. The longstanding presumption that only lawyers could be trusted to offer legal services is called into question, and officials in other jurisdictions start considering more closely the possibilities of regulatory reform to open the market.

It’s important to note that final entry in the foregoing bullet-point list of features. The work that many lawyers once performed (especially new lawyers in large firms) is relocating to lower-cost or higher-efficiency providers elsewhere, but it is not yet being eliminated altogether. New people in new places are doing essentially the same work that lawyers here once did. This new state of affairs, however, is also a temporary one.

Again, the start and end dates are approximate; I chose 2016 as the back end of this period largely because it feels, in 2012, like we’re about halfway there. This mix of past and future history seems to me the likeliest model to explain and predict current and future events. For many lawyers, this is not a fun time. Unfortunately for them, as tomorrow’s entry suggests, things are about to get considerably worse in Stage 3.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.


The evolution of the legal services market: Stage 1

I recently delivered my 15th and final presentation of 2012 about the changing legal market. Over the past 12 months, I’ve given speeches and keynote addresses to large firm retreats, sole practitioners, bar leaders and regulators, chief justices, law students, CLE providers, law librarians, and other groups and organizations throughout the United States and Canada. If I had one piece of advice to share from all these excursions, it would be that you will never regret bringing backup versions of everything electronic, especially should you accidentally spill a full bottle of water onto your laptop just before a presentation.

I haven’t just been speaking to these groups, however; I’ve also been listening to what these diverse stakeholders in the legal marketplace have to say. And I’ve taken away two sets of impressions.

The first is that a very wide spectrum of knowledge and perspective exists regarding the nature of change in the legal market. I’ve met lawyers and legal professionals who flatly dismiss any suggestion that the market is changing in ways that are revolutionary and permanent. I’ve met others who saw these trends developing years ago and have already re-engineered their businesses to adapt. The vast majority of audience members lie somewhere in between. Most of the people I’ve spoken with, however, have been surprisingly and encouragingly interested in what’s going on in the wider legal world and what it might mean for them.

My second takeaway, and the one I’d like to explore in greater depth over the next five days, is that there’s no real consensus within the legal market about just what’s happening to it. We don’t appear to have a collective sense of what kind of road we’re traveling, where it’s taking us, and at what stage of the trip we currently find ourselves. This is important, because without a shared understanding of both our journey and our destination as marketplace participants, it’s difficult to talk about how to make the trip better, shorter, and more productive.

So I thought I would set out for you my views on the state of the legal market and how change is rippling through it: where we’ve been, where we are, and where we’re likely to go. It seems to me that there will be five stages in the ongoing evolution of the legal market — and by extension, of the legal profession itself. By my reckoning, we’re about halfway through Stage 2. Today’s post will explore Stage 1; each of the next four phases will be examined in separate posts over the course of this week.

Stage One: The Closed Market


  • Law is a protected industry, with one legitimate, authorized, self-regulating provider (lawyers).
  • Legal knowledge and tools are largely inaccessible without lawyer involvement.
  • Lawyers regulate the market, policing their own conduct but also investigating and eliminating non-lawyer competition.
  • Lawyers “compete” with each other in genteel fashion, rarely undercutting other practitioners on rates or introducing systemic improvements to methodology or workflow.
  • Lawyers, facing no real competition and under no real pressure to innovate, create inefficient enterprises to deliver legal services, measure cost in hours, and price their services on a cost-plus basis.
  • Lawyer jobs increase proportionately, if not out of proportion, to legal service demand — the lawyer population grows year after year, like an expanding balloon.
  • Most legal services are expensive, and most lawyer careers are highly remunerative.
  • Legal technology is almost entirely “sustaining,” offering more convenient ways of carrying out traditional tasks without re-engineering those tasks.
  • Legal education is almost entirely academic and delivered to baccalaureate standards; professional experience is gained through on-the-job training, at clients’ expense.

Era: From most of the 20th century up until no later than 2008.

This is the legal market as most of us found it when we were called to the bar. In Stage 1, we run the show, and we run it to our liking. Not only do lawyers own the only saloon in town, we’re also the local sheriff, keeping the peace by prohibiting anyone from opening up a competing tavern. We enjoy the luxury of running our businesses as we please, safe in the knowledge that our collegial competitors in the profession will not create undue disruptive pressure through pricing or service delivery innovations. We deliver good products and half-decent service to a very limited, deep-pocketed clientele. Most lawyers make a fine living, and in many larger firms, they make an astoundingly fine living. These are good times for lawyers.

But they aren’t perfect times, of course. Our reliance on cost-plus pricing, our desire to increase profit, our aversion to risk, and our unwillingness to innovate all combine to create an over-reliance on individual hourly labour as an engine of growth. This in turn leads to burnout and emotional problems among lawyers and growing dissatisfaction with the lawyer’s life, not to mention frustrated clients who seek greater price certainty and more proactive interest from their providers. It also leaves us vulnerable to the possibility of competitors who might choose to play by different rules; we fail to develop any natural defences beyond regulatory action.

Legal education, meanwhile, underperforms its potential: most faculty have little experience with practice, and almost all faculty view the practicing bar with a certain degree of contempt, leading to generations of law graduates singularly unprepared for a legal career. Self-regulation, while critical to our independence, breeds bad habits of protectionism and self-indulgence. And it perhaps goes without saying that access to justice belongs primarily to those with the money to afford lawyers and the time to see legal matters through the labyrinthine legal process.

You could certainly argue the cut-off point for this era. Some might trace the beginning of the end to 2004, others to 1999; if you practised residential real estate, you can go back considerably further than that. There was no single “light switch” moment at which everything changed and a new paradigm emerged fully formed; evolution isn’t like that. Some of these tendencies weakened throughout the 2000s, while others are still going strong today. But it seems fair to assert that by 2008, when the financial crisis was breaking and the first provisions of the Legal Services Act were being enacted, the longstanding era of the lawyer-centered legal marketplace was drawing to a close.

An observer from outside the market could easily see how this artificially calm state of affairs might be ruptured, and would hardly be surprised to learn that such a breakage was imminent. Tomorrow, we’ll take a look at what happens when this long-closed market is abruptly breached by numerous external forces.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

And the walls came down

Last week, I had the pleasure of delivering a speech to the Institute for the Advancement of the American Legal System (IAALS), an innovative program headquartered at the University of Denver that addresses reforms to legal education, access to justice, and judicial selection. They had asked me for a presentation that would explain the challenges facing the legal profession today and outline the contours of the legal market of tomorrow.

I thought you might like to read a condensed version of my remarks, which touched upon many issues that I’ve canvassed here at Law21 over the past few years. Considering that this is also my 400th post here, it seemed appropriate to share what amounts to a summary of my views on the legal profession, the legal market, and the legal system.


We face enormous change in the legal marketplace: primarily, the emergence of new competitive and disruptive forces that are mounting increasingly formidable challenges to our traditional assumptions and understandings about legal work. At the same time, we are grappling with a legal and justice system that is not giving anyone much satisfaction, and is in fact giving many people a great deal of heartache. There are numerous disconnects among how things used to be in the law, what they’re like today, and what we wish they would be.

So what can we do? Perhaps not surprisingly, I say we adapt. We need to see the legal world as it is and as it surely will become, and then we imagine what it might be and do everything we can to make that vision real. Our memories, our narratives, our assumptions and expectations about the law — both individual and collective — these are the walls we’ve built around the legal market and around ourselves, and they are limiting our vision. It’s time to lower the walls and let illumination come in.

Let’s begin by seeing the legal world as it is. What are we up against? What are we dealing with? Here are five points to get us started.

  1. Growth in lawyers’ business has stalled. With a few exceptions, law firms of all sizes have seen business slow down, revenues flatline or decrease, and new business become increasingly difficult to find.
  2. Lawyers’ pricing is under tremendous pressure from clients. I mean “pricing” in both a dollar amount sense — rate discounts are multiplying — and as a methodology — flat fees are proliferating.
  3. Low-cost alternatives to lawyers are picking up business. Large firms have seen the rise of law department insourcing and legal business outsourcing. Smaller firms have seen Legal Zoom, Rocket Lawyer and the like target their markets.
  4. A huge glut of unemployed new lawyers is building up. Employment rates for new lawyers in the United States have fallen sharply in the wake of the financial crisis. At large law firms, they’ve fallen off a cliff — down 40% in the last five years.
  5. And finally, although you may not have felt it, an earthquake struck the legal profession earlier this year. Its epicenter was London: it was the issuance of the first licenses to operate what’s called Alternative Business Structures, law firms owned by non-lawyers.

These, at least, are not predictions or suppositions. This is really happening, right now. And it’s happening because of a series of changes to the legal marketplace, both here in the US and worldwide. Once again, I’ll give you five to consider.

  1. A lengthy period of strong economic growth powered by heavy borrowing, interspersed with occasional hyper-growth bubbles and busts, has come to an end. We are not in a “recession,” in the usual sense of the word. We are in a lengthy period of slow deleveraging and weak, fitful growth. It should last at least another five years, and maybe longer, give or take a fiscal cliff, a Euro collapse, or a hard landing for China’s housing boom.
  2. Clients have acquired a potent combination of knowledge, power and urgency. Basic legal information is more widely available today than ever before. Basic legal tools are easily accessible at low cost or no cost across the internet. And clients cannot and will not spend a dollar more than they absolutely must on anything, and most especially on lawyers.
  3. New providers and new technology are starting to enter the market. I mentioned companies like LegalZoom and legal process outsourcers a moment ago, companies in their infancy that have already generated a surprising amount of business. But there’s also new, disruptive technology that can replicate basic lawyer functions and, in some cases, more complex lawyer functions.
  4. Generational change continues. We tend to forget about this — partly, I think, because everyone was talking about the rise of the millennials and the retirement of the boomers, right up until the financial crisis. And then suddenly, we didn’t hear much about work-life balance anymore. But generational turnover continues, and it affects legal organizations of every kind. And let’s not forget: it also affects clients. The cultural values of both legal buyers and legal sellers are slowly transforming.
  5. Finally, the regulatory environment for legal services is changing. Lawyer self-regulation is gone in Australia and it’s gone in England and Wales. In my home province of Ontario, paralegals are members in full standing of the Law Society of Upper Canada, lawyers’ governing body. The United States will hold out against this trend longer than anyone else — except possibly India — but its arrival here is still only a matter of time. Lawyers will be sharing the market with non-lawyers, and I cannot overstate how important that will prove to be.

So where will this lead us? What does the “future of the legal profession” look like? Here are some of the key features I think we can expect in the legal marketplace of the future.

1. Systems and technology will make substantial inroads into the legal market.

Today, if someone asks me, “Can machines replace lawyers?” I’m inclined to say, “Well, only if the lawyer in question isn’t very good.” Now, that’s a little harsh, and it’s not entirely fair — to either the lawyer or the machine. If you were to ask me instead, “Can a machine replace aspects of what lawyers currently do?” —  well, that’s a different question, and the answer in many cases is yes.

Automated contract creation, data-crunching analysis systems, expert applications that answer regulatory and compliance questions, online dispute systems powered by game theory — all these programs are available right now. They are solidly built, they are attracting investor interest, and they are only going to get better as they grow. They do their jobs in minutes, not in billable hours, and they are more reliable and sophisticated than many lawyers would be prepared to credit.

We’re at least 10 years away, probably more, from machines that can completely replace lawyers. But we’re already in the era when machines can displace lawyers — take on some aspects of their work, some percentage of their tasks, bump them aside, jostle into their seats, force them to go do something else. And that percentage is going to grow. I can’t tell you at what rate, or how quickly. It will be different for different markets and different types of work.

But the fact is that a great deal of what most lawyers do is not that complicated. At least some of it can be done by non-lawyers — and in some firms, it already is, by secretaries, paralegals and clerks; in future, it will be done by machines, processes and systems. But in many law firms today, it’s being done by lawyers. It’s what many of the hours billed in the legal profession today consist of — and that is not sustainable. That’s a hard truth. But we need to hear it said.

2. Non-lawyers will have proliferated throughout the market.

I dislike that term intensely, by the way: “non-lawyers.” We are the only profession I know that divides the world into “us” and “not us.” We use that term all the time, and we rarely appreciate how insulting it is to the people thus described.

But non-lawyers are coming. We are going to share this market with them. The sooner we accept that and start working to accommodate its impact, the better. They’re coming because they are proving their abilities and reliability every day. They’re coming because lawyers have claimed too much territory under the all-powerful description “the practice of law,” too many activities that do not require a lawyer’s rare and valuable skill and judgment.

And they are coming because we have done a lousy job of serving the entire legal market. Clients, both individual and corporate, are spending more and more and waiting longer and longer for outcomes that leave them less and less satisfied. And that’s just the people who can afford lawyers and the legal system in the first place. Many people are not even in the game at all.

And that is on us. These problems developed on our watch, under our administration and stewardship of the legal system. They are our responsibility. We have had ample opportunity to rectify them, and as everyone here knows, we have not moved fast enough or far enough. So governments and citizens are going to start saying, “Time to let someone else try.” Time to start putting the “Unauthorized Practice of Law” in the history books. Look at what’s happening in England and Wales, and recognize that eventually, inevitably, it will happen here.

3. The legal profession will be smaller, but also more specialized and successful, than it is today.

I don’t really see a way around a smaller bar. Gradually, year by year, innovations will continue to disrupt the legal profession. The capabilities of providers outside our profession will expand, from lawyers in India to para-professionals in North America to software packages in the cloud. Lawyers simply will not be necessary to accomplish things that required our services in the past.

It’s possible that we may still need more than 1.1 million lawyers in the United States ten years from now. But I don’t see it as probable. What I see as probable is an endgame for a legal education system that is already producing more law graduates than the market can employ and far more than it will need in future. And I don’t see any likelier outcome than that dozens of law schools will find themselves superfluous to the new legal market.

I do think we will need fewer lawyers. But I also think that the tasks those lawyers end up doing will, on average, be more valuable, more sophisticated, more demanding, and more remunerative than they are today. I think that a market will emerge for more sophisticated legal needs, a robust market that needs lawyers to provide counsel, wisdom, advocacy and preventive law services — the fence at the top of the cliff, as Richard Susskind says, rather than the ambulance at the bottom.

This is where I think the modern law firm has made its greatest mistake. It keeps trying to force more and more low-value, hourly-billed work out of a resource — real, live, human lawyers — that is intrinsically intended to provide high-value work. We’re not meant to spend our days filling out documents and conducting basic transactions and providing “commodity” services. That’s not why we went to law school. We’re supposed to be put to a higher, better use. Call me a cockeyed optimist — not many people do — but I believe that in the future legal market, that’s what will emerge.

It’s not just our clients that would benefit from this, nor just the latent legal market that would finally be tapped by a wider, deeper range of fully accessible legal service providers at affordable prices. We would benefit from this. We are professionals, and if you trace that word back to its Latin roots, you’ll find that it comes from the Latin profiteri, “to serve.”

We are a serving profession. We are fiduciaries to our clients, ambassadors of the rule of law, foundation stones for a civil society. Or at least, we’re meant to be, although I think we’ve lost our way a little over the past few decades. But I believe, in future, that’s what we can become again. And we should be a happier, more fulfilled profession as a result, because we’ll be better aligned with our best use and our best purpose.

In the words of IAALS’s mission statement, we need “continuous improvement” in the legal system — constant development, ongoing innovation, relentless efforts to make tomorrow’s reality better than today’s. We need to challenge assumptions, break down walls, illuminate the landscape.

My advice to you, in this ongoing effort, is to look beyond the walls of the legal profession, beyond the boundaries of what we have always taken for granted, always assumed is the normal state of affairs in legal services. It’s not normal; it never really was. As a profession, we need to be prepared to let go of our defenses and preconceptions, to lower the walls we’ve built around ourselves and our clients.

We need to recognize that we’re not the only ones who can help. There are other people, other solutions out there that want to help improve the legal system too. Yes, they’re a little unsteady on their feet. Yes, they’re still getting the hang of it. But they want to help, and they can help — and whether we like it or not, eventually, they will help. If and when they displace us, then it’s up to us to find a new, better place and a new, better purpose.

The only real question is whether we’ll extend our hand, and how long it will take for us to do that, to build the future legal marketplace and reforge our profession at the same time. If we do, then I’m hopeful and confident that that future will arrive a lot sooner than we think.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

Law firm profits in the process era

Large and midsize law firms appear to have an “expenses problem.”

  • Few managing partners expect that they’ll be able to corral rising expenses in the foreseeable future, according to the Citi Private Bank Law Firm Group’s most recent report. The bank’s newest survey of law firm leaders showed that only about 10% believed expenses would decrease by as little as 5%; about 21% thought expenses would stay steady, and a whopping 69% believed expenses would rise, with more than 22% forecasting an increase greater than 5%.

We know a few things about this market by now, or at least we should. First and most importantly: demand is soft, and it promises to stay that way for a few years. Macro-economically, we’re all stuck in a low-growth environment, with several landmines still active in Europe and China that could go off anytime. Law firm business is equally slack: every recent survey of in-house counsel confirms that law departments are insourcing more work and are pushing back on fees for the work they do send out. (Bruce MacEwen goes further and insists that “Growth is dead” in a must-read five-part series of Adam Smith Esq. posts, with a sixth to come.)

Aggressive marketing and business development can go some way to offset this decline in demand, but you can only squeeze so much blood from a stone. Severely discounting rates will get you some work, but clients have been playing this game for awhile and they know how it works: the firms keep raising their rates, the clients keep asking for steeper discounts, and the circle of life goes on. Demand is soft, and there’s not really much firms can do about it.

But expenses are up too, and firms can do something about that, even if they haven’t had much success so far. Physical premises might be off-limits if the firm is in the middle of a long-term lease (hopefully not one signed at the height of the boom), but property owners under recessionary pressure might be persuaded to renegotiate terms. Moving into a less ornate yet still respectable location is sometimes an option, though most lawyers are extremely reluctant to risk the perception of shifting downmarket, and it ain’t exactly cheap to move a law firm.

The killer expense for most law firms, however, is people, which is why reducing headcount is still a popular route to an improved bottom line. We all recall that firms threw thousands of employees over the side in the wake of the financial crisis. But most haven’t fully repopulated, instead forcing more work onto the partners, associates and staff who remain. That trend has never really gone away: just yesterday, white-shoe UK firm Slaughter & May fired 28 secretaries, while partner de-equitization remains the new black for every large firm. But you can only fire so many people, and you can’t fire them over and over again. At a certain point, you stop cutting fat and start carving into bone.

The other popular option is to find cheaper alternatives to your current staffing arrangements. But as Bruce points out in part 4 of his “Growth Is Dead” series, labour market arbitage — “a) cheaper people; (b) cheaper locales; (c) cheaper career paths; (d) cheaper offices, or some combination of all of these” — also has built-in limits: “You can only move certain people out of midtown Manhattan once, and you can only introduce the non-partner associate track once; [moreover,] there are virtually no barriers to entry in the labour market arbitrage business. If AmLaw firm A can do it, so can AmLaw firm B, C, D … — not to mention the Pangea3s and Integreons of the world.”

Bruce then goes on to make a critically important point: “We have not fundamentally changed how we do things. We have changed who does them and where.” [My emphasis.] I think that’s the heart of the matter right there.

Law firms have run up against a wall when it comes to reducing expenses, and that wall is their business model. The traditional law firm business model is fundamentally people-intensive. The only way most firms know how to get work done is by using lawyers and support staff. Few technologies more advanced than email management or time and billing software govern their operations. Few systems more sophisticated than hourly docketing support their workflow. People provide the vast majority of law firms’ products and services — but the market price of those products and services is falling below the baseline cost of their in-house providers and will eventually surpass the cost of the outsourced ones. Something has to give.

There’s only one door that leads through that wall — but firms are immensely reluctant to walk through it, because it leads to a radically new business model. The fundamental nature of law firms has to change from “people-intensive” to “process-intensive.” Systems and technology must play a greater role in the creation of products and services — not least because systems and technology are less expensive, more easily scalable, and completely immune to lateral hiring offers. Lawyers must be reassigned from performing systems-level work to either overseeing that work or taking on higher-value tasks. We are well into the process era I identified more than three years ago. It’s past time for firms to acknowledge that and adapt.

But many don’t. Many firms keep trying to force more low-value productivity from a resource — lawyers — that is fundamentally designed to deliver high-value production and that has maxed out in its current usage. The law firm business model has to shift its primary fuel source away from lawyers and towards systems, reserving the challenging tasks for the former and relegating the routine work to the latter. This is no longer a matter of being innovative and cutting-edge; that was three years ago. Now it’s about remaining competitive and profitable.

Don’t underestimate the impact this business model change will have throughout the legal ecosystem. Because the volume of routine legal work is much greater than the volume of challenging work, law firms will require fewer lawyers to create and deliver their inventory — a lot fewer. I’ve already written about the fact that many law firms have too many partners. The next step will be the legal market’s eventual realization that it has many more lawyers than it needs.

We can already see the outlines of this new market emerge. Prof. William Henderson has noted that new lawyer hiring by large US law firms has fallen off a cliff: “In 2011, firms of 500+ attorneys hired 2,856 entry-level lawyers. In 2007, that figure was 4,745. So, after five years, Big Law is paying the same wage but hiring 40% fewer lawyers.” Even if, as Mitt Regan suggests in a comment, that 2011 figure represents the nadir rather than a midpoint, we’re not going to see those hiring levels go back to where they were, because the work simply isn’t there.

The best-case estimate of US new-lawyer full-time legal employment right now is about 55%. According to the US Bureau of Labour Statistics, 44,000 law school grads are expected to compete for 28,000 jobs over the next decade. We should expect to see compensation for entry-level lawyers nosedive over the next few years, as the glut in that particular supply becomes clear.

It’s not simply a matter of law schools producing too many graduates for the market to absorb. It’s a matter of law schools producing graduates for a legal market that will shortly pass from this world. Law firms today are lawyer-intensive, process-light operations; throughout this next decade, they’ll become process-intensive, lawyer-light operations.

Law schools are not the only stakeholder in this industry to be fundamentally misaligned with that future: legal publishers, CLE providers, and bar associations are likely to be the hardest-hit, because they all rely on “volume of lawyers” as the basis for their businesses. Conversely, legal technology suppliers and legal systems analysts should have a field day as they retrofit firms for leaner infrastructure and more mechanized operations. (Read my article on disruptive legal technologies if you’d like to refresh yourself as to what’s coming.)

Law firms wonder where the growth in the legal market has gone. But Toby Brown has answered that: growth is bypassing law firms and going instead to innovative new providers, few of which are law firms and hardly any of which employ lawyers in the usual way. Law firms are going to realize that in order to compete for this market growth, they will need to emulate the approach of these competitors, which invest heavily in systems and reserve lawyers for those tasks that truly require their intellectual heft and skilled judgment. The hard fact for lawyers to absorb is that those tasks are much fewer than our traditional law firm model supposed them to be.

Many law firms believe their “expenses problem” is all about cutting costs to preserve profit in the face of declining revenue. It’s not. It’s a concrete sign of the growing misalignment between law firms’ lawyer-intensive workflow models and the market’s emerging requirement for a better use of resources in the delivery of legal services. The “expenses problem” can’t be solved by making deeper workforce cuts or by playing around with outsourcing and automation. It can only be solved by recognizing that firms must be configured differently in order to deliver legal services profitably.

Business is down for law firms, and it will stay down for a while. But when it comes back (and remember, it always does), it will look different and behave differently than it did before. Your firm must be ready for that. If you have an expenses problem today, prepare to change the way you do business tomorrow.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

The College of Law Practice Management’s 2012 Futures Conference

The College of Law Practice Management does a lot of great things — honours the pioneers and brightest lights of legal management, sponsors the InnovAction Awards, supports various access to justice initiatives, etc. But next month, you have the opportunity to participate in one of the College’s most high-profile and important projects: The Futures Conference.

From October 26-27, 2012, at Georgetown University Law School in Washington, DC, scores of the legal profession’s thought leaders and decision makers from around the world will gather to hear cutting-edge presentations from some of the most influential players in the legal market. The entire brochure for the Futures Conference can be found here (in PDF format), while Ron Friedmann has an excellent post summarizing the presenters and their presentation.

I’ll content myself merely with listing the speakers, to give you a sense of the star power at this event:

That is a powerhouse lineup you won’t find anywhere else this year. If you haven’t booked your reservation yet, I strongly encourage you to register today for the College of Law Practice Management’s 2012 Futures Conference. As Richard Susskind says, “The best way to predict the future is to create it.” This is your opportunity.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

Walking away from a losing game

And suddenly, everyone’s talking about Procurement. Not that long ago, warning lawyers about the rise of the corporate purchasing function was a little like a medieval parent telling their children about the goblin who lived under the floorboards: you’d better behave, or he’ll come and eat you up. Now the goblin is loose: Procurement’s importance in the purchase of outside legal services, which has been slowly and quietly growing over the past few years, is exploding into view.

Silvia Hodges writes at Bloomberg Law about Procurement’s growing role in Legal, Ari Kaplan provides procurement examples at Law Technology News, and Toby Brown at 3 Geeks gives us three separate columns on the intersection of procurement and legal spend and the implications thereof. You should take the time to read all of these entries, but I think the authors’ overall point is that

(a) Procurement is here to stay,
(b) Procurement’s traditional approach to purchasing is a questionable fit with best practices for legal spend, and
(c) the ideal outcome would be for procurement representatives, the in-house department and the outside law firm to work together towards arrangements that try to serve everyone’s interests.

I’m not confident that (c) is a likely outcome, given each party’s dramatically divergent self-interests, but it’s certainly worth a shot.

What interests me more about the rise of Procurement, however, is how it illustrates a broader trend throughout the legal community: our tendency to let third parties set the rules by which we operate. Procurement at least has a good argument for being at the table: it’s an important aspect of the corporate client that pays the bills. But I’m talking more generally about lawyers ceding control over our own business and professional destinies — our ongoing acquiescence to more aggressive players who have set the standards by which we judge ourselves. The two highest-profile examples, interestingly, are magazines.

For lawyers in large US firms, of course, it’s The American Lawyer. I don’t need to tell you that AmLaw is an excellent periodical, among the very best in class. But the AmLaw 100 rankings are a remarkable thing. A magazine chooses a single metric (average profits per partner) by which to assess large law firms and invites those firms to submit annual financial information so that the magazine can judge them on that metric. And the law firms do exactly that. Has that ever struck you, at any point, as, well, a little odd?

The AmLaw 100 (and 200) rankings, and their progeny in other publications, have arguably done a great disservice to law firms’ own sense of identity and success. Average profits per partner is a flawed metric in many ways (not least mathematically — even median PPP would be a more accurate gauge of a firm’s financial situation, since outliers don’t skew the result so much). It’s especially flawed because it regards annual profit for individual owners as a direct proxy for the health, success and prestige of a law firm. Recent history nicely illustrates the problem with that — Dewey & LeBoeuf was profitable and prestigious until shortly before it crashed.

We already know that good law firms provide more than just partner profits. They also deliver enterprise-wide productivity, a satisfying vocation for employees, a positive corporate social footprint, and above all, value for clients specifically and the legal system generally. Those features aren’t as easy to measure as PPP (especially when the firms conveniently supply all the figures), but they’re no less important. The pernicious modern belief that “The purpose of a business is to create wealth for its owners” was never all that accurate even for ordinary businesses. Law firms are not ordinary businesses — they’re fiduciary professional businesses that operate in a very favourably regulated environment, and they require both responsible management and responsible measurement.

You can probably guess, at this point, that I’m no big fan of PPP rankings. But as much as this approach to measuring law firm success alarms me, I’m more alarmed by the degree to which law firms have surrendered to it. Large US law firms routinely make important decisions about partner recruitment, associate development, legal service pricing and a host of other issues based upon whether the outcome will affect their PPP.

The spectre of a precipitous dive down the AmLaw rankings, and the legitimate fear of the subsequent loss of key partners to firms higher up the list, drives any number of short-term tactical moves by law firms. Some of these moves are sensible; many others aren’t. But the point is that we’ve allowed someone else to set the criteria that drive these decisions. We judge our success on their terms, rather than setting our own standards and taking our destiny into our own hands.

Similarly, take a look at law schools and the degree to which they’re beholden to magazine-based rankings. The US News & World Report — a publication I once referred to as the RC Cola of weekly news periodicals — is infamous for the influence it wields over American law schools. A publication — this one without any actual connection to the legal profession — adopts a series of criteria that it considers important and uses those criteria to rank the schools.

These rankings and their criteria subsequently become vitally important to the schools, which start making decisions — about applicant admission, student classification, faculty hiring, even the number of books in their libraries — not on what’s best for the school and its community, but on what will help them move up the rankings. In many cases, as Brian Tamanaha notes, these decisions have driven behaviour that was not only unwise, but also flat-out dishonest.

In-house counsel now face, with Procurement, a similar phenomenon. Just as the AmLaw rankings care about a single metric (partner profit), procurement officials tend to care about a single outcome: lower expenditures. If that becomes the sole focus of in-house law departments, then it will drive very different types of internal behaviour by Legal — some of it good, some of it not; but all of it determined by someone other than the lawyers involved.

I want to emphasize here that Procurement is not a villain, and neither is US News nor The American Lawyer. These are corporate entities making business decisions that happen to involve or affect the legal profession, and they have every right to do so. The problem, from my point of view, is that lawyers and legal enterprises haven’t responded strongly enough to advance our own priorities in turn. We’ve allowed ourselves to be drawn into games in which we didn’t write the rules, in which those rules don’t serve our best interests, and in which other players’ moves dictate our own. Is that really the best we can do? Are we so insecure that we’re content to be the raw material for other people’s platforms?

Maybe so. But I would hate to think that we went down that road on anyone’s terms but our own. If we allow other people’s criteria for success to become our own, and then blame those criteria when we engage in highly questionable behaviour, then we have an existential problem. But we’re powerless only if we decide to be. We can decide for ourselves what behaviour is important to our mission and values. We can assert broader and better criteria for success, and transparently self-publish them. We can make it perfectly clear, both internally and externally, what matters to us, and then let the world judge us on those choices, not on someone else’s.

The only way to win a game in which you’re set up to lose is not to play. The only way to gain control over your own destiny is to ignore anyone outside your core constituencies who asserts otherwise. There are exactly two constituencies that law firms have to please: the clients who buy their work and the lawyers who are paid to produce it. There are exactly two constituencies that law schools have to please: the profession that hires their graduates and the students who pay to graduate.

Law firms’ and law schools’ conversations about strategy and destiny need to start with those constituencies, and they should end there, too. Everything else, no matter how popular or pervasive, is ultimately just a sideshow and a distraction.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.


Law21 3.0

If you’re reading this post at Law21, then you already know about this. But if you’re subscribing via email or RSS, you might like to come see the new look and feel we’ve created today.  In our first re-design in nearly four years, we’ve given Law21 a cleaner, cooler, and sharper design, with a new colour scheme, improved navigation, and additional features. Here are some of the highlights:

  •  Access to more posts from the front page, thanks to an automatic “Read More” feature
  •  More detailed and updated content about me and the work I do in “About,” “Appearances” and “Consulting
  •  Easier access to all my previous Law21 articles in the new “Archived Posts” section
  •  Links to more than 50 of my best original articles in other periodicals in “Published Works
  •  A great new dashboard at the bottom of each page, including “Subscription” information; and
  •  A new photo, just because.

All the credit for this tremendous new look goes to my web design professionals: Jesse Collins of Moxy Webworks in Mississauga, Ontario, who also brought you Law21 2.0 and keeps this site humming along at top speed, and my longtime collaborator Tony Delitala of Delitala Design in Oakville, Ontario, who also brings you National magazine and the Edge International Review. My sincere appreciation to, and strongest recommendation of, both of these amazing talents.

I hope you like our new look, and I hope you’ll continue to come by and read my ongoing dispatches from a legal profession that is, more than five years after Law21 first launched, still very much on the brink.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.