I have to admit, when I started a recent series of trips to make presentations in the U.S. and Canada, I’d been questioning whether my recent assessments of and predictions for the legal profession had maybe become too radical. Having now returned from speaking with and listening to some of the sharpest and most engaged minds in the business, I’m coming to think I haven’t been radical enough.

Certainly, there was encouraging news. Delivering serious and perhaps discomfiting messages to state bar leaders in Chicago and law society executives in Toronto, I was heartened by the openness to these ideas and the readiness to address our current challenges that our profession’s leaders displayed. Some lawyers and some firms might be ignoring what’s happening in this marketplace, but in no way is that universal, and I think it bodes very well that the people in charge of many of our legal institutions are facing these challenges head-on. Listening to the managing partners of some of the world’s largest law firms at a Georgetown Law symposium in Washington, D.C., it was also refreshing to hear at least some of them acknowledge that the old model is passing away and the adaptation to a new model will be difficult but necessary. Certainly, everyone else in the room, which included almost every thought leader who wasn’t otherwise engaged at ABA TECHSHOW, was fully cognizant of what we’re facing (and two new surveys confirm it).

For all that, though, I came away from these experiences more convinced than before that major, rewrite-the-rules change is imminent in this marketplace, and that some current institutions simply won’t survive in recognizable form. You should read the media accounts of the Georgetown Law Firm Evolution event, from observers like Aric Press, Rachel Zahorsky, Ron Friedmann, Greg Bufithis, and various Twitter correspondents (as well as a response from Robert Sawhney), to get a sense of the scope of change that was discussed.

But for me, the penny dropped during the dinnertime address by Richard Susskind, whose remarks included a heartfelt plea for conference delegates to lead a change for the better that the profession and justice system desperately need. One of Richard’s topics was the Legal Services Act in England & Wales, and its soon-to-be-active provisions allowing alternative business structures (ABSs), including non-lawyer equity investment in law firms and legal enterprises (here’s a sampling of articles, from last September to last week, describing scenarios under which law firms might invite such investment).

Richard, however, has been speaking with investors who are actively engaged in preparing entry to this marketplace, and he reported that law firms are not their primary target; in fact, their interest is coalescing around legal service providers that we now consider to be on the fringes of the profession, like legal processing outsourcing companies. These are the providers that outside investors think are much likelier than law firms to emerge successful from the ABS upheaval, and it’s where most of the new capital is going to go.

Match that up against what the private equity people have been saying on the subject. Jeremy Hand of Lyceum Capital is quoted in two of the previously linked articles as saying his company has a “focus on new business delivery models, not traditional law firms,” and is looking to work with firms with “a modern, streamlined, low-cost delivery model — quite different from that of the traditional partnership.” Tony Williams of Jomati Consulting, who advises Lyceum, added that the new private-equity model emphasizes equity over debt, and equity-driven investors require high rates of return: “So firms need to have a very clear understanding about what they can do with that money that gives a higher rate of return to them and to the private equity people.” None of these remarks resonate with how the vast majority of law firms go about their business — but they do sound a lot like how non-lawyer providers conduct themselves and view the marketplace.

Put all that together, and this scenario emerges: private equity enters the legal marketplace in England & Wales, but it pays just glancing attention to traditional law firms, deciding that it doesn’t need the headaches that come with trying to manage lawyers and reinvent law firms built around the billable hour. Instead, most of the money heads for efficient, accessible, predictable, process-driven operations that are aligned more closely with how modern businesses operate, including LPOs, online and virtual service providers, and streamlined, fixed-fee lawyer boutiques. Already, Intermediate Capital Group has made a £440 million investment in CPA Global, the LPO firm that famously took a huge chunk of legal work from Rio Tinto last year. That purchase effectively placed a marketplace value on CPA Global approaching $1.4 billion. How many law firms, if they were to go public today, could aspire to a $1.4 billion market cap?

LPOs, it has to be emphasized, are not just doing first-year associates’ grunt work, not anymore. They are moving up the value chain steadily and with surprising speed, taking on the work of second-, third- and fourth-year lawyers — not just by using lower-cost labour, but by doing the work more systematically and efficiently. As I said a while back, these companies will not be content with basic work forever; they see no reason why they can’t eventually do the toughest legal jobs. Billion-dollar legal services providers, unfettered by traditional lawyer restrictions, can go global instantly and almost effortlessly. They’ll have more than enough money to acquire the top talent from the best firms worldwide, to invest in new systems and innovations that will reduce costs even more, and most importantly, to change clients’ expectations about what a law firm can deliver. They will be law firms, in effect, and even if lawyers in a given jurisdiction somehow succeed in keeping them out, the landscape will have changed: clients will demand their lawyers compete on the same playing field.

Some firms, especially in the UK, seem to sense this already, and they’re taking outsourcing seriously (though perhaps none as seriously as Eversheds, which has gone into the LPO business itself, albeit with risks). More interesting are attempts by some firms and clients to rethink workflow, such as the move by Royal Bank of Scotland towards a “Mexican Wave” system (pioneered by Lovells) that you’ll be hearing much more about in the months to come (a City firm does the “higher-end” client work while sending more routine work to lower-cost firms in smaller centers). Also intriguing are joint lawyer-client ventures in the UK (such as those by Geldards and Kent County Council and by Berwin Leighton Paisner and Thames Water) whereby in-house and outside counsel are integrated to an unprecedented degree. I’m pleasantly surprised by the innovative approach these firms are taking, and I hope it’ll be enough to secure their positions when the floodwaters really start pouring into this marketplace.

For many other firms, though, the challenges are extremely serious. The prospect that emerges from all this is a legal services marketplace in which many law firms are simply irrelevant — they’re not structured in ways that deliver maximum value to clients and they can’t compete with rivals that are. There was a lot of talk at the Georgetown event about whether “BigLaw is dead,” and I have to agree with those managing partners who dismissed the notion: these firms are obviously up and about and making a great deal of money, and it’s absurd to pretend they’re dead men walking.

The worry, for me, is that many firms, of all sizes, aren’t ready for the radical ways in which the playing field is about to change. Their focus is either straight ahead, on their clients, or internal, on their own condition and competitiveness. They’re like a quarterback whose gaze is either locked downfield on his receivers or focused dead ahead on the defenders in his path. As a result, he never sees the hit coming, from his blind side, that flattens him and turns the ball over to the other team. It’s not just lawyers and clients who matter anymore. New players, with an unprecedented combination of size and speed, are charging onto the playing field like a storm and rewriting the rules of the game as they come.

That neatly encapsulates what I think is a real and dangerous trend at a lot of the bigger law firms: week by week, rate increase by rate increase, they’re pricing themselves out of the market. The profit imperative is so strong at these firms, and the level of economic sophistication often so low, that rate increases are ordered up regardless of whether the clients want them, can afford them, or are screaming bloody murder about them. To the extent a firm thinks about its clients when raising rates, it often wagers that they have relatively limited options — they need to get the work done and they want it done by lawyers they trust — and that they aren’t prepared to make a radical and onerous move like switching firms (especially since almost all big firms operate the same and bill the same anyway). That gamble has paid off handsomely over the years, and so the firms have had little incentive to change their approach.

What’s happening now, however, is that the clients and their lawyers are teaming up and doing an end run around the firms. There’s been a barrage of reports over the past few months about lawyers abandoning big firms to set up smaller boutique practices, taking clients with them, and thriving in the result. It’s a four-step process: client tells lawyer it can’t afford her rates anymore. Lawyer tells client she doesn’t control her rates and doesn’t want to lose the client. Light bulbs appear simultaneously over their heads. And a few months later, a new small firm is born, with at least one A-list client on its roster.

I’ve seen and heard variations of this account many times in the last several months. Sometimes the motivation is financial, the chance to keep good clients and retain more profit. Sometimes, especially for women who set up their own shops, it’s to escape the inflexible culture of large firms that insist lawyers devote their prime family-starting years to business. And sometimes it’s the natural desire of talented and ambitious lawyers to start a new chapter in their lives — the difference being that this new chapter can now start with an old client. All the lawyers I’ve spoken with and heard about who’ve taken this plunge couldn’t be happier — and they couldn’t be busier, either, not only with the old clients they brought along but with new clients drawn to the prospect of great lawyers at affordable prices.

This American Lawyer article describes the genesis and market advantages of these new boutiques:

It’s all about value. The recession has increased clients’ price sensitivity, creating an opening for smaller firms with lower, more flexible costs. Boutiques cater to cost-conscious clients by lowering overhead expenses, slashing rates and offering alternative fee arrangements, while providing the same legal services that their founders offered at their old firms. …

Mark Suzumoto, name partner at Van Etten Suzumoto, says his rate has dropped 30 percent to 40 percent since leaving McGuireWoods. Durie has lowered her rate 20 percent. At bankruptcy boutique Harrington Dragich, James Harrington says he gives clients a “meaningful discount” on what he charged at Foley. …”The biggest positive of our firm is that we’re delivering the same expertise at a lower cost,” says Harrington.

These lawyers can reduce their rates not just because they’ve been freed from the large firm’s profit yoke, but because they’re also throwing off much of the overhead costs — expensive leases, summer student programs, extensive administration, and general infrastructure — that large firms have accumulated over time. The benefits this infrastructure delivers to the big firm can be argued, but the benefits it delivers to clients are usually negligible at best. As far as the client’s concerned, the primary and sometimes only benefit of hiring the firm is that it gets to work with a lawyer it likes and trusts. So if the client can get that lawyer at a lower cost and with less hassle, it will. It’s also no coincidence that in many of these new firms, lawyers are selling their services on a flexible- or flat-fee basis. That’s the new reality of the lawyer-client relationship, and these boutiques are among the first to get it.

I’m not sure if large firms in this situation realize how much danger they’re courting. Two of the profession’s oldest truisms are that clients hire lawyers rather than firms, and that a firm’s only real assets walk out the door every night with the intention to return the next day. Firms that raise their fees to the point that both clients and lawyers leave seem to be forgetting or ignoring these rules. Or, maybe more likely, they know these rules and they recognize the risks, but their cultural machinery is simply too rigid and complex to allow them to respond effectively. So many aspects of the traditional law firm model are breaking down, from annual rate increases to unilateral pricing to pyramidic associate leverage to open-ended hourly billing, that it’s hard to know what to address first.

But a joint exodus of good lawyers and good clients — not to another firm, but to a brand new settlement altogether — can’t be interpreted as anything but a disturbing sign. A firm can survive a couple of these kinds of losses, but much more than that, and the internal crisis of confidence can spiral out of control very quickly. If your firm hasn’t yet noticed the link between higher rates and lower billings, take a good look right now.

I used this analogy — high-wattage lamps that cast vast amounts of light in a wide circle, contrasted with smaller, sharper, focused sources that put only the light you need exactly where you need it — in a recent discussion about the future size of law firms. My theory is that most things being equal, the future belongs to smaller firms and solos, because the large-firm model ultimately suffers from an over-reliance on volume and an inability to finely focus resources.

Many big firms are like very large lamps with incredibly high-wattage bulbs that radiate huge amounts of heat and light — but in doing so, waste a lot of energy because they light up parts of the room that don’t need it and that aren’t going to produce a return on illumination investment, so to speak. Smaller firms, which do only a few things and do them in a very specific way, are like flexible halogen lights that aren’t for everyone and everything — but are ideal for certain contexts and needs. Mass broadcast power through reach and volume was the key to success in the 20th century, from media to manufacturing to marketing, and large law firms flourished in this environment. Their largeness was a competitive feature: volume as strategy, size as an end in itself.

In the 21st century, a different model will take hold. The future is fragmented, channeled, specific, focused, niched: a needle instead of a sledgehammer, a laser instead of a lamp. The elements of small practice — flexibility, dexterity, specialization, and personalized service — are ideally suited to the deeply diverse, long-tail legal marketplace that’s now emerging. A recent Economist article about the forthcoming U.S. census makes clear just how much is changing. The 2010 census is expected to reveal an unprecedented degree of diversity in the American population, a development of the utmost importance to marketers:

Cesar Conde, president of Univision Networks, a Spanish-language media company, says [the census] will be a “wake-up to marketers”. Once the results are in, firms are likely to invest more in marketing to minorities, to develop more products to appeal specifically to them, to advertise in languages other than English and to hire more racially diverse models. Peter Francese, a demographer at Ogilvy & Mather, an advertising agency, thinks the 2010 census will permanently change marketing. When companies analyse the census data, they will see that cities, and even some neighbourhoods, are so diverse now that broad advertising campaigns are no longer suitable. Mass-market advertising, he says, will become “extinct”. Marketers will instead have to focus on reaching specific households.

While the mass market continues to shrink and dry up, technology is simultaneously making the tiniest niche more accessible. Consider what Google CEO Eric Schmidt said about the future of his company: the goal is to give the user exactly one right answer to a query, not a list of possible right answers, essentially transforming Google from a search engine to a “find engine.” This technology already exists in the form of Wolfram Alpha, an “answer engine” that “computes and provides answers and relevant visualizations from a core knowledge base of curated, structured data.” These innovations should be widely available not much more than ten years from now, and at that point, how much good is size and volume going to do you, in terms of attracting customers and answering needs? People looking for legal help will find the one right answer or the one best answer, and all the size and marketing wattage in the world won’t help you be a better solution.

Starting now, law firms will have to justify their size. This is not only because the economic rationale for some law firm lawyers will cease to exist — traditional associates with too little work to pay their salaries, partners who fail to demonstrate their contribution in value terms, and the general decline of the leveraged pyramid model — but also because the advantages of size qua size are disappearing. Largeness does still have its virtues, starting with the fact that many big institutional clients need a law firm with multiple offices and a hefty workforce to mobilize on short notice. Big firms also offer “lawyer insurance” to clients: if my lawyer is away, five others can take my urgent call. And brand still counts for a lot, and will presumably count for even more in the age of the “answer engine,” when there’ll be a real advantage to circumventing the search process altogether.

But many of these virtues are gradually being counteracted by technological and cultural developments. Solos can collaborate with each other, through social networks and websites, as easily as a big-firm lawyer can walk down the hall and talk to a colleague — and can serve as backups for each other too. Small-firm lawyers can afford all the technological bells and whistles that big firms have long enjoyed, especially with the rise of SaaS and open-source technology. Small-firm lawyers can write blogs for next to nothing that, with the help of advanced SEO and link-building techniques, could outdo million-dollar big-firm marketing budgets in terms of getting the attention of the clients they want. With all these forces at play, a law firm that’s larger than it needs to be is going to run into problems.

Any biologist will tell you that the bigger an organism, the more energy and resources it needs to expend to keep going. Unless there’s a powerful competitive advantage to being big, smallness will begin to assert itself. Today, there are tiny desktop lamps that cast stronger light than the biggest, most florid 1970s table lamp, and even tinier lasers that put them both to shame in terms of power and accuracy. If you’re looking for a reliable model for law firms of the future, I’d recommend betting on the laser.

It’s an intriguing question, but not because of whether it would be feasible — it already is. Firms following this model are blossoming across North America and Europe. They offer corporate clients the services of lawyers with pedigreed credentials (large-firm and law-department experience) who will work from the client’s office or from home, for limited periods of time, at much lower rates than traditional law firms charge. The selling point for clients is the services of an excellent lawyer on the client’s terms, at a competitive price that excludes traditional firm overhead costs and revenue expectations; for lawyers, the challenge of high-end work on a short-term, flexible or even itinerant basis.

Maybe the best-known of this new breed of firms is Axiom Legal, which is closing in on the 300-lawyer mark, but there’s a growing collection of similar operations like Virtual Law Partners, FSB Corporate Counsel, Paragon Legal, Cognition LLP, Virtual Law [UK], The Rimon Law Group, and Keystone Law. They’re often called “virtual firms,” but that’s a little confusing, in light of the growing number of small cloud-based law practices. I prefer VLP’s self-description, a “distributed” law firm, or Keystone’s, “dispersed.” Concerns about these firms usually focus on the scope of their expertise, their value for money, and their KM and quality-control systems, all reasonable worries.  There doesn’t seem to be much question, however, that these firms are sustainable and are already legitimate players in the marketplace.

No, what’s really intriguing about these firms is the fact that they developed at all — that the traditional law firm has become sufficiently unpalatable to the people who retain it (and to some of the people who work inside it) that something new and different can flourish. Dispersed law firms directly challenge the traditional law firm model, presenting themselves as at least a complementary service to what traditional firms offer, and at most, a full-fledged alternative provider. These new firms question the fundamental nature of traditional firms, arguing that the physical concentration of legal talent in a high-priced centralized location with a rigid hierarchy and pyramidic revenue structure is outdated and self-serving. Flexible, project-based, techno-savvy, client-focused law firms are the way of the future, they contend: they’re more efficient, more accessible, and more rational.

So the battle lines have been drawn; which side you come down on may be influenced by how much you think physical proximity and legacy superstructure contribute to the expertise and collegiality of lawyers and to the power of the law firm brand. But is this the battle that will determine what “the law firm of the future” will look like? I’m not inclined to think so. As I’ve said before, what we’re seeing emerge now are multiple potential models for law firms, any or all of which could prove sustainable; the distributed or dispersed law firm is a firm of the future, not the firm. And I tend to think that traditional and dispersed firms will come to resemble each other over the course of time anyway.

That’s why, for me, the most fascinating new entry in this area is an operation called Lawyers on Demand (LoD) — it’s a dispersed law firm owned and operated by a traditional law firm. And it opens up a whole new conversation.

Lawyers on Demand is a service of UK law firm Berwin Leighton Paisner, and while both will undoubtedly be familiar to UK readers, LoD at least will be largely new to the North American legal marketplace. Lawyers on Demand bills itself as “an alternative resourcing solution for in-house legal teams, providing talented and experienced interim lawyers to meet client needs … a flexible pool of high-quality, freelance lawyers who are trained, vetted and supported by BLP and who work directly for clients.” Designed in part to attract good lawyers seeking more flexible work arrangements (it was launched during the height of the talent wars in 2007), LoD also very much resembles the dispersed law firms that compete with traditional firms like BLP. In fact, LoD’s co-founder describes it in part as “a reaction to the growing trend for clients to move against firms’ traditional hourly-rate charging format. … [We] wanted to establish a pioneering program that would enable clients to receive legal advice at a fraction of the usual cost….” That’s a remarkable thing for a traditional law firm to say out loud.

Lawyers on Demand is not to be taken lightly: it recently added Cisco to a client base that includes Dell, UBS and Gucci, and it led all comers in the Client Service category of the FT 50 Innovative Lawyers awards last year; in some respects, it’s the natural evolution of secondments. But it’s arresting to see a distributed law firm, every other instance of which is competing directly with traditional firms, owned and operated by one. It raises some fascinating questions.

For instance: what is the effective difference between a BLP lawyer and an LoD lawyer? Yes, the type of work they do is different — LoD lawyers work on-site with the client for limited periods of time for a specific purpose, whereas a BLP lawyer stays in the firm and carries out traditional tasks pertaining to ongoing client files — but that’s a difference in implementation, not in basic nature. Berwin Leighton takes pains to emphasize the high quality of LoD lawyers, which I’m sure is true, but if the quality and support are comparable and the LoD lawyer is considerably less expensive, where does that leave the BLP lawyer, competitively speaking? Would a client be inclined to favour the less costly and more flexible lawyer? Is there a risk that by operating a nigh-virtual and less encumbered version of its own firm, BLP effectively highlights for its clients some of the drawbacks of traditional law firms?

Or is that less a risk and more a strategic plan? What intrigues me is the idea that through the creation and operation of LoD, Berwin Leighton is both protecting itself against this new competitive threat and adopting some of that competitor’s advantages. It’s telling clients they don’t have to choose between the old-style firm and the new-style firm — that they can have either or both, depending on their needs and circumstances at any given time. At this point in the evolution of the legal marketplace, when corporate clients are simultaneously pressured to reduce cost but also to maintain a sense of quality control, effectively offering clients two firms — one traditional, one innovative — could prove to be a remarkably powerful competitive advantage. Berwin Leighton is the first law firm to do this, to my knowledge — I doubt it’ll be the last.

So maybe there’s no need to carve all the bad things out of a law firm, or abandon all the good things in order to start something brand new. Maybe you can put two ordinarily competitive models side by side in the same organization, let each complement the other while doing what it does best, and let clients pick and choose what they want from the resulting menu. Maybe the future isn’t “lawyers on demand” so much as it is “law firms on demand.”

I won’t try to improve upon the analyses already provided by Bruce MacEwen, Alex Novarese and Aric Press, among others. But I will provide one quote from each to indicate that this is not your garden-variety merger announcement:

- Bruce: “This is potentially a transaction that will change a conspicuous portion of the BigLaw landscape globally.”

- Alex: This is “the first concrete evidence to back up the claims made for months by managing partners on both sides of the pond that the general mood is warming to transatlantic mergers.”

- Aric: This is “a sign that while the Magic Circle and most financially elite New York firms continue to insist on their independent futures, firms just one step behind can see a future where a combination is greater than the sum of their parts.”

And in its daily e-newsletter, The Lawyer put it this way: “[T]he consensus so far in the market is that this deal could genuinely see the creation of something not seen before. ‘At a stroke you’ll have a firm the size of [Allen & Overy], better quality than DLA Piper, broader in scope than Herbert Smith and far more international than anything in the current UK mid-market,’ is how one London consultant sums up the deal.” The arrival of anything truly new in the legal services marketplace is always noteworthy, but a Hogan/Lovells merger could have significance beyond whether the firm manages to become more than the sum of its parts (which at this point seems fairly likely).

For one thing, this firm could be really transatlantic, in ways previous cross-ocean expansions (cf. Clifford Chance and Rogers & Wells) were not: a mega-firm, created by a merger of equals, with a center of gravity somewhere between the two capitals rather than vying between them (Hogan & Hartson, with a strong government practice, is headquartered in Washington, D.C., such that traditional London-New York rivalries might not kick in.) Back in February, I forecast a true US-UK powerhouse emerging from the recession, although I thought the American entry would hail from the Big Apple, and I didn’t think it would happen quite so soon. If the experts are right, other cross-ocean mergers might follow and a real wave of consolidation could be at hand.

Secondly, it’s instructive to note the innovations that each side is bringing to the table. The Lawyer reported earlier this month that Lovells is preparing to abandon its lockstep partner compensation system in favour of Hogan’s pure merit-based approach. Merit-based compensation has tremendous momentum in large firms right now, and although no one’s denying the challenges of partner compensation facing a potential Hogan Lovells, this suggests that more complex systems for assessing lawyers’ productivity are at hand. At the same time, Lovells was one of the first law firms to publicly acknowledge it was outsourcing legal document review to India, back in December 2007. UK firms are substantially ahead of their US counterparts in offshoring, so the Hogan side of the deal is going to acquire direct experience with this phenomenon. So in at least two ways, this is going to be very much a 21st-century law firm.

But here’s the main reason why I think this deal could be a game-changer: about a year after the expected May 2010 date for the Hogan Lovells merger to be completed, key provisions of the Legal Services Act come into force, and UK law firms will be allowed to accept non-lawyer investment and ownership under Alternative Business Structures (ABS). What if a future Hogan Lovells decided to take advantage of those provisions? It doesn’t figure to be the kind of Magic Circle or white-shoe firm that most agree would disdain the entrepreneurial offerings of the LSA — in fact, it looks exactly like the sort of firm (fresh, ambitious, global, innovative and unencumbered) for which the non-lawyer equity investment provisions were designed. If this new firm — or any other powerhouse resulting from a US-UK merger in the near future — went down that road, extremely interesting things would start to happen.

Hogan Lovells would be both English and American — and not one of the 50 states allows non-lawyer ownership of even a fraction of a law firm. So if this new firm did in fact accept venture capital or investment-fund equity, or float shares on a stock exchange, it likely would be in immediate contravention of the ethics rules in all the states where it carries on business. Hogan & Hartson, by way of example, currently has offices in Maryland, Colorado, Texas, California, Florida, New York, Virginia and Pennsylvania, as well as the District of Columbia. The ensuing tangle, it seems to me, would rapidly bring to a head the burgeoning conflict between how UK firms and US firms are structured and governed. In a globalized legal profession, this conflict is inevitable — but this new firm, if it comes into existence and if it acquires an ABS under the Legal Services Act, could actualize that conflict much sooner than we  expect.

So keep a closer eye on this merger than you normally might. It could be just another instance of two large firms becoming an even larger firm, still struggling to make its way in a challenging marketplace. Or it might turn out to be the catalyst for unprecedented change in the profession worldwide.

If you happen to subscribe to my Twitter feed, you’ll notice that I regularly post links to stories of interest in the legal press. If you look closely, you’ll notice that a great many of those stories relate to developments in very large law firms. That’s not because I’m fascinated by BigLaw or because I think my subscriber base is either. It’s because that’s what gets published. The legal press pays a disproportionate amount of attention to large law firms — as do we all.

The best-known legal periodical, The American Lawyer, is so tightly intertwined with large firms that the 100 biggest are referred to as the AmLaw 100. ALM’s web-based publication, law.com, is heavy with large-firm content (though in fairness, it does have a Small Business page too). The UK has two periodicals that closely follow BigLaw, LegalWeek and The Lawyer. In Canada, it’s Lexpert. In Australia, it’s ALB Legal News, and so forth.

But even purportedly general-interest legal periodicals also devote a substantial amount of space talking to and about lawyers in large operations. I’ve spent the last ten years editing a bar association magazine whose readers are mostly in firms of ten lawyers or fewer — but a look back over those issues would probably reveal a lot of coverage given to big firms.

If a periodical intentionally focuses on BigLaw, generally it’s because  large-firm lawyers traditionally make a lot of money, so they’re attractive both as subscribers and as advertising targets. But why do many other legal publications over-emphasize big firms, relatively speaking? Mostly, it’s because those firms have both the motivation and the resources to engage with the media.

Large firms have marketing directors, PR experts, website personnel, even a growing number of social media mavens, all paid to raise the profile of the firm and its lawyers. So when your average overworked legal journalist goes out to search for story ideas and contacts, he or she finds the big firms all over the place — they’ve established a powerful presence on the landscape. Not only that, but their PR professionals handle all the work of media relations, leaving their lawyers free to focus on client tasks. Small-firm lawyers and solos, by contrast, generally leave a much smaller footprint in the places where journalists search for ideas and leads, and few can afford to devote otherwise billable time to engaging even the mainstream media, let alone the legal press. The end result is that the rich, so to speak, get richer.

But I think there’s more to it even than that. If our professional media outlets spend an unusual amount of time mooning over big-firm lawyers, it’s because the profession does too. The prevailing culture of the bar, for many years, has been to attach an unusual amount of prestige to big law firms and the lawyers who practise there.

Whether we like to admit it or not, we often tend to think that a lawyer in a large firm with a well-known brand and spacious offices in a big building downtown is somehow a superior product.  There’s no rational basis for thinking that the size of a law firm has any bearing on the quality of the lawyers within it — yet that belief has infiltrated the way many lawyers think and behave. (Not the popular imagination, though. Atticus Finch didn’t work for a large firm. Neither did Perry Mason.)

Now, my point, as I hope you’ll appreciate, is nothing so hackneyed as big firms bad and small firms good. It’s a much narrower observation that small firms and solos are underrepresented in our professional media — and that this is not a good thing.

It’s not good for law students, reading Above The Law in class and thinking that the fascination with large firms and their payrolls is normal and healthy. It’s not good for new graduates who read legal magazines and newspapers and come to believe there’s something less admirable and prestigious about working in a smaller firm (or, heaven forbid, in a public-sector or law department capacity). It’s not good for the profession as a whole that the interests, priorities, cultures, and business habits of large-firm lawyers are presented as the default setting for private practice. And it’s not good for smaller practices, which count the majority of all lawyers among their ranks, that they don’t get to hear their stories told, their concerns addressed, their best practices circulated, and their career choices validated in proportion to their presence in the profession.

If there’s a solution here, it’s going to have to emerge from the ranks of these smaller-firm lawyers themselves — waiting for institutional publishers to change their editorial focus is not a good plan. Smaller practices need to find a way to amplify their voice and multiply their narratives within the profession as a whole. Maybe they need to help create their own media channel, pooling resources and enabling advertisers to find and support them. Maybe they need to harness the power of social media in ways that big firms haven’t figured out yet, to create the first truly online legal periodical through some innovative combination of blogs, RSS, Twitter and LinkedIn, and focus it on their issues. Maybe they need to figure out what the small-firm equivalent of Legal OnRamp would look like, and start recruiting their clients to join.

In any event, I’m inclined to think  our current fascination with the size of a law firm will eventually start to fade. As someone pointed out at the College of Law Practice Management’s Futures Conference last month, “big firm” and “small firm” are increasingly specious and distracting distinctions. To the extent we need to divide the bar — and it’s not always clear to me that we do — we should divide it along the lines of whether a firm serves a consumer client base or a corporate/institutional client base, because those really are very different types of businesses. That would be a lot more useful than adding up how many lawyers use the firm’s stationery, and drawing unwarranted assumptions from the result.

That observation comes from Bruce MacEwen of Adam Smith Esq., and I share his concern that false confidence will lead too many large firms to believe that everything’s going to be basically okay. For large firms, everything is emphatically not okay.  The past couple of weeks have delivered a series of examples that demonstrate one thing: the ways in which large law firms have operated over the past few decades are coming to an abrupt end.

First, consider this this Legalweek report that two major international firms, Mayer Brown and Reed Smith, are jumping onto the fixed-fees bandwagon. Mayer Brown is readying itself to offer fixed fees for all its transactional work, as well as to make more frequent use of abort agreements and success fees. Reed Smith, meanwhile, plans to use fixed or capped fees in its financial industry group, in its corporate and real estate practices, and for transactional work.

What brought about this sudden departure from the easy-and-profitable billable-hour system? The firms’ leaders cite client relationships first and foremost, which is nice to hear. But perhaps equally instructive are two other articles linked from that Legalweek story: 55 job cuts at Mayer Brown in March, Reed Smith hiring a restructuring consultant in July. Few firms undertake changes of this potential magnitude unless the outside pressures exerted on them have made things very uncomfortable. (It’s worth noting, as Jim Hassett’s webcast does, that these are not the first AmLaw 100 firms to  climb onboard this train.)

Even more revealing are the contents of a leaked strategy memo from O’Melveny & Myers that appeared on Above The Law. The firm plans to “adopt a single rate card by FY2012, with volume and ‘investment’ discounts and appropriate alternative fee arrangements … becoming the leader in providing high-end legal services on a fixed fee basis, reducing costs to clients and achieving superior economic performance through practice management oriented toward cost effective client service.” Especially noteworthy are plans to reduce associate leverage to as low as 2-1, a ratio that’s positively Canadian.

Fixed fees, if done right (a big if), are demonstrably better both for the client and the lawyer. The question is whether large firms constructed on billable-hour pyramids can really adapt their culture and systems to make such a monumental change. Many big firms still think the key to flat fees is to take the last ten bills issued for this kind of work, average them out, add 10% for contingency, and present the final figure with a flourish. Fixed-fee veterans in smaller firms are skeptical, to say the least. Here’s Valorem’s Patrick J. Lamb on these big firms’ moves:

The essential element of alternative fees that actually work is that they shift risk to law firms, meaning the value changes from leverage and body count to experience and fewer bodies.  More brain power, less body count.  So a goal of reducing leverage “in some practices” to “as low as” 2 to 1 will make anyone experienced with alternative fees laugh out loud.  O’Melveny might as well take out a full page advertisement saying it really won’t be changing a damn thing.

I’m prepared to give O’Melveny’s initiative the benefit of the doubt, actually — every journey has to start somewhere, and I want to encourage every green shoot of innovation I see. But man, is this a long journey — changing a law firm’s fee and billing structure is like re-engineering your DNA, and the best will in the world won’t make it any less difficult. And for every large firm that is finally acknowledging that the horse they’ve ridden for years has died, ten more are still clinging on to the saddle.

The O’Melveny memo states at one point: “In the very recent past, our business model, as a whole, has yielded disappointing financial and practice growth results. … [O]ur litigation clients are looking for rate and fee reductions, and we expect that mindset will continue into the next good economy and beyond.”  That understates the size of the challenge. It’s not just litigation clients — a lawyer at a large firm confirms to me that the pressure for lower and/or more predictable costs is intense and is coming from across the client spectrum. This is the new reality, and large firms will struggle to make the sort of fundamental changes needed to adapt.

Let’s look at another key element of law firm success: personnel. The results of a survey published in The American Lawyer are interesting, if not surprising: associates in large firms are measurably more unhappy than their counterparts in smaller firms. Not only that, but graduates of the “elite law schools,” from which so many big firms insist on drawing most of their recruits, are the unhappiest of all when compared to their colleagues from “less elite” schools. (It doesn’t help that, as Ron Fox points out, law schools of every rank tend to funnel their graduates towards large firms and away from opportunities to serve ordinary consumers in smaller practices.)

You can probably guess the advice that the study’s authors offer big firms as an antidote: recruit outside your usual law school boxes, and make life for your new lawyers a little less punitive. It’s advice unlikely to be accepted, says Aric Press, editor-in-chief of American Lawyer: “I fear that we will look back at the exuberant spree of the last few years as the high-water mark of nonelite law school hiring. … This leaves an opportunity for the firms wise enough to seek first-class talent no matter what brand is on a diploma.” But how many firms will risk the CYA comfort of consistently recruiting from “the best and the brightest,” let alone make substantive changes to the overall associate model?

The study’s authors note that big-firm attrition is particularly frequent among women and minorities. Underlining that concern is this account of an event celebrating Working Mother magazine’s 50 Best Firms for Women Lawyers. Many of last year’s winners didn’t make the cut this time — in part, perhaps, because despite wishful thinking to the contrary, leaner times at big firms have made it harder, not easier, for women to advance and succeed:

It’s optimistic to believe that most large law firms are rethinking the work/life balance equation during these hard times. Frankly, most firms today are focused on survival and on a need to bring in more business — they are not, it seems, focusing on the larger questions of the meaning of work and job satisfaction. From where we sit, covering women in the profession for almost a decade, we don’t see a revolution on the horizon.

So: profits are dropping fast, more firms are getting ready to change the basic business model, the young talent is alienated, and diversity has been back-burnered. But that’s not the worst of it for big law firms. Because all this time, solos, small firms and midsize operations keep picking up all the opportunities that the large firms keep dropping.

While big firms allow women to walk away, one small firm encourages its employees to bring their children to work — not to an on-site day-care, but into the office, all day long. While big firms burn through their young talent, innovative companies like DirectLaw offer new lawyers reduced pricing to start up a solo virtual law platform — with 90 days’ free tuition to Solo Practice University to boot. While big firms set up committees to consider fixed fees, small firms have long since figured it out and will even tell you, as Jay Shepherd does, how they set their prices. All the momentum in the legal services marketplace today favours small, adaptable, innovative, client-focused, value-oriented, business-savvy providers. Most large law firms answer to immobile, traditional, self-centered, profit-oriented, and business-challenged. It’s not hard to pick the winner here.

Every marketplace, even one as artificially stunted as legal services, operates according to the law of supply and demand. The demand is changing, irrevocably. The suppliers that change with it will survive; the ones who don’t, won’t. Some more large firms are waking up to this fact and doing their best to change — but I’m concerned that 2009 is simply too late to be starting the change process.

The lawyers operate remotely, but they tap into a larger infrastructure with centralized billing, IT support, marketing, and recruiting efforts. They also share work frequently, communicating through video chat or e-mail as needed. Technology companies and startups were early converts, but the firms have added lawyers with varying expertise, including employment, real estate; FSB has even started a litigation practice.

Answering the article’s eponymous question in the negative was Patrick J. Lamb, who operates a bricks-and-mortar but nonetheless highly innovative firm at Valorem Law. He suggests that virtual firms suffer by comparison to boutiques thanks to one key difference.

The difference?  The ability to aggressively collaborate. Even with the best communication hardware, there is something lost when you can’t go next door and bounce ideas off someone who may have nothing to do with the case but who is vested in its outcome. I’ve experience firsthand the accelerated evolution of ideas from really good to extraordinary when several experienced minds combine their talent and judgment and work through a problem.

Speaking for myself, it’s not clear to me how a partner in a virtual law firm differs meaningfully from a well-connected high-tech sole practitioner. Both run their own practices in a highly personalized and streamlined environment, often rely on cloud-based infrastructure to manage their practices, set their own rules for client relationships, and operate with an unusual degree of autonomy. I think virtual firms aren’t cyberspace versions of traditional law firms so much as they’re loose aggregations of like-minded solos under a common banner that happens to be hung on the internet.

So I don’t think virtual firms are the future. But I do think they’re a future. More specifically, they’re one of a growing number of law firm models that will all be able to flourish in the next couple of decades. That’s because what we’re really seeing here is the demise of the traditional cookie-cutter law firm as the default setting for legal service enterprises.

One of the great things about the current upheaval in the legal marketplace is that the old expectations and parameters of law firms are losing their iron grip on the profession. Look, for example, at FutureFirm 1.0, a two-day competition this past April to take a tired traditional law firm called Marbury Madison LLP and overhaul it for the 21st century. Hosted by Prof. William Henderson at the University of Indiana Maurer Faculty of Law, FutureFirms attracted some of the most innovative minds in practice, the corporate world and academia. The event produced a blueprint for redefining large law firms that includes alternative fees, merit-based compensation and risk-sharing with clients — and they’ll do it again next year.

Or take a look at a forthcoming article in the CBA’s National magazine (which, full disclosure, I edit) titled “2020 Vision,” written by lawyer and Legal Post blogger Mitch Kowalski. It looks back from the year 2020 at the development of a very different (and hugely successful) law firm called BFC Law Professional Corporation that abandoned most of the trappings of the traditional firm. Of particular note for our purposes is the future firm’s “hub-and-spoke” approach to its physical premises:

The Hub
We maintain meeting room space downtown (the Hub), equipped with staff, computers and the like. This space also contains hoteling niches where lawyers have workspace and telephone/internet access. Remember, all our systems are cloud-based, so lawyers and staff can work anywhere. Office management handles all boardroom and hoteling niche bookings.

The Spoke
BFC’s day-to-day legal work is done at a public transit-accessible location outside the downtown core (the Spoke). Not only is rent much cheaper there, our staff and lawyers find the Spoke to be closer to their homes,  which reduces their travel time and increases their quality of life. In the Spoke, we have moved away from separate offices for lawyers,  which allows for the efficient use of smaller rentable space with better HVAC flow (further reducing costs). Small meeting rooms throughout the Spoke accommodate privacy as needed.

What the virtual law firm, Marbury Madison, and BFC Law all have in common is that they’re different and quite realistic visions of how lawyers can come together to offer legal services to the marketplace. They reject, or at least test severely, the standing assumptions about how a law firm should be constructed, both physically in terms of its premises and organizationally in terms of its clients and employees. In doing so, they reflect our evolving understanding within the profession of just what a law firm is supposed to look like.

We have this funny little idea in the law that the nature of your work and the quality of your practice are heavily influenced by the physical environment in which you operate. Are you on the 40th floor of a steel and glass tower in an urban center? You must be doing intricate, high-end, bespoke work for multinational clients. Are you in a nice but inconspicuous brick building with a wooden front door and creaky floorboards in an exurban community? You must be doing basic, commoditized work for unsophisticated clients. Lawyers love to judge people, and the people we love judging the most are each other, using criteria that reveal more about our own assumptions and biases than anything else. What the rise of the virtual law firm really signifies is that those assumptions, at least in terms of law firm structure, should soon be fading away.

In fact, if the form that a law firm takes will be influenced by anyone, it’s going to be clients, not lawyers. Both clients and lawyers — but especially lawyers — are very used to the idea that “they” come to see “us” in a place and at a time of our choosing. That simple unconscious assumption sets the tone for all relations that follow between the two parties. Lawyers have always had home-field advantage over clients, and we like it that way.

Now, the gravitational pull is starting to run the other way. As clients’ influence grows, so too will their ability to draw us to them, rather than vice versa. That doesn’t have to mean house calls — although it might — but it does mean that law firms will feel more obliged to arrange their physical availability in ways that increase convenience to clients. “Lawyers on demand,” a little like time-shifted TV shows? It’s not a preposterous result, and even thinking about it prepares us to better adjust to future client relationships where we don’t get to set all the ground rules from the start.

Yesterday’s law firm selection was a boxed lunch packed by lawyers; tomorrow’s is going to be a lavish buffet with clients standing in line next to you while you choose. For all that we still need to work on diversity within law firms, it’s going to be nice to have a little diversity of law firms as well.

“By and large, I’m going to be picking from the law schools that basically are the hardest to get into. They admit the best and the brightest, and they may not teach very well, but you can’t make a sow’s ear out of a silk purse. If they come in the best and the brightest, they’re probably going to leave the best and the brightest, OK?”

Justice Scalia’s criterion for identifying excellent future law clerks is depressingly common within the profession. He doesn’t actually know how to identify the best and brightest law students and new lawyers, and he’s hardly alone in that. He’s one of many people who rely upon a law school or law firm’s exclusivity, elitism, household name or other purported quality signifier as a substitute for having to actually determine “bestness and brightness” for himself. It’s a habit hardwired into tens of thousands of annual decisions about  which school a 1L should attend and which schools a law firm should recruit from, and it doesn’t do us any good.

Let’s start with the law schools. Everyone knows there are elite schools and non-elite schools, right? Even if you don’t read the noxious US News & World Report law school rankings or their equivalents in other countries, you “know” which are the “best” schools, especially if you graduated from one of them. How do you know? They have the best reputations, of course — even if you couldn’t name one aspect of the educational experience that justifies “elite” status or name three elements of substance that differentiate any one school from another. “Reputation” and “prestige,” based on countless dimly illuminated factors poked into the crannies of our minds, might hold sway, but we have no empirical evidence that an “elite” law grad is any better or brighter than a “non-elite” grad. Magazine rankings and law blog chatter serve only to confirm our existing region- and class-based prejudices about what places one school above another.

The great majority of law schools are largely indistinguishable from each other, in terms of the nature of their education, the quality of their teaching, and the (negligible) practical elements of their training. Almost every law student is smart and works hard — that’s the baseline standard of admission (along with, in most cases, tremendous pre-existing socio-economic advantages). Some schools keep class sizes intentionally small or raise tuition beyond most peoples’ reach, but while that may make them more “exclusive,” it doesn’t make them any better at teaching students the law. If there are ways of determining the “best and brightest” law students, finding out where they take their classes hasn’t proven to be one of them.

None of that keeps law firms (and Supreme Court justices) from relying on school pedigree to make interview selection and lawyer hiring decisions for them. But that raises an even more pernicious problem: let’s say you could figure out who the “best and brightest” law graduates are — how do you know which of them will turn out to be great lawyers? Law school prowess has little relevance to eventual lawyer success — the absence of correlation between LSAT scores and lawyer success has been proven. Yet those who hire new lawyers continue to rely on law school performance as a hiring factor, even though it tells us little about whether a student possesses or can quickly acquire the skills that practising lawyers need, the appetite and aptitude for client service, business management, persuasive advocacy and ethical steadfastness.

Now, here’s the funny part: the system has in fact come up with a way of determining which are the “best and brightest” law students  — they’re the ones who get hired by the “best and brightest” law firms! And how do we know which firms fall into that category? Well, they’re usually very old, very large, and very well-known (and big old famous organizations are all but guaranteed to prosper, right?) But the main reason these firms are considered the best is — wait for it — they recruit only from the best law schools! The Cravath system has been around for so long that the “top” law schools and the “top” law firms now perform a little pas-de-deux, each using the other tautologically to confirm its own higher sense of self (“our graduates go to the best firms”; “we recruit only from the best schools.”)

And that brings me to the final aspect of the “best and brightest” phenomenon that’s so problematic: this belief  that the “top” lawyers are to be found at the “top” firms. I am not saying, not a for a nanosecond, that large well-known firms don’t count among their  ranks some of the finest lawyers the profession has produced. Of course they do. But they don’t own the exclusive monopoly on that particular asset. I’ve met brilliant lawyers of extraordinary skill in midsize regional firms, solo practices, corporate law departments and public-sector environments. And I’ve met lawyers who work for famous law firms whose skills and talents are pedestrian. Succeeding in a BigLaw environment is undoubtedly a sign of the fact that you have the qualities to thrive in that kind of environment — but those qualities are not automatically equivalent to superior talent and execution. In our big-firm, AmLaw-obsessed legal culture, this obvious truth keeps getting lost.

All of which is to say, if you find yourself talking about “the best and the brightest” the legal profession has to offer, or you hear someone else saying it, ask a few questions: Best at what? Brightest according to whose standards? Based on precisely what criteria, and how many of those criteria are irrelevancies, assumptions, stereotypes or conventional wisdom? Let’s not buy into a myth that puts you down or puts other people up without sufficient cause. I think a powerful, sweeping assessment like “the best and the brightest” deserves and requires more scrutiny than that.