Why women leave law firms, and when they’ll return

Visiting my alma mater Queen’s Law School recently, I paused, as I often do, before the framed graduation picture of the Class of 1973. It was startling for this member of the Class of 1993 when I saw it 20 years ago, and it’s downright unbelievable seeing it 40 years on in 2013. Among the Law ’73 grads, you will find exactly one — repeat: one — woman (Mary Jane Mossman, who went on to become an award-winning professor and Associate Dean of Osgoode Hall Law School in Toronto).

By the time I enrolled in law school in 1990, women made up about half of all law school classes and were said to constitute as much as 60% of the incoming classes at some faculties. So the Class of ’73, as shocking as it was, seemed like a relic of a distant past. But it’s worth remembering just how male-dominated the legal profession has always been. Check out these figures compiled by the ABA: as recently as 1980, men outnumbered women in the US legal profession by a staggering 92%-8%. Roughly ten years later, the breakdown was 80%-20%, and ten years after that, 73%-27%. (In 2010, the most recent year available, the split in Canada was 68%-32%.) It seemed like a natural progression was underway towards a more balanced profession.

But by 2005, the US split was still only 70%-30%, and several indicators suggest that’s as good as it’s going to get: women and minority hiring has backtracked at large law firms since the financial crisis, and The Careerist points out that of the ten top-ranked US law schools, only one has more women enrolled than men. The issue is especially acute in the private bar: women enter law firms, but they don’t stay there for long, moving to sole practices, into in-house positions, into the public sector, or out of active legal careers altogether.

One statistic nicely sums up the current state of affairs: women constitute just 15% of equity partners at AmLaw 200 firms. Take a moment to let that one sink in. (For more depressing reading, click the link to get a detailed account of ongoing compensation gaps between women and men at these firms.) The profession, to its credit, has been trying for the last 20+ years to address this problem, creating commissions, task forces and programs of all kinds to support women in private practice. Whatever impact these efforts have had, they have shown little evidence of successfully enabling more equitable status for women in law firms.

I’m now coming to conclude that this is because all these efforts, well-intentioned as they might be, are looking at the situation the wrong way. We’ve been assuming that the lower numbers of women in law firms is a problem that needs rectifying. But what if we stop looking at women’s legal career choices as a failure that needs fixing, a failure to fit the traditional standards of success? What if, instead, we start looking at this trend as evidence of women’s eminently sensible and illuminating response to the state of law practice?

Here’s my theory: women aren’t leaving law firms at an abnormal rate. They’re leaving law firms at a perfectly rational and normal rate. It’s men who are staying in law firms at an abnormal rate. Women aren’t the faulty outliers; men are.

When you look at the situation that way, a lot of things start to make sense. Women who enter law firms quickly and accurately diagnose that these are amateurish organizations that employ archaic workflow systems, inept pricing mechanisms, skewed compensation structures, and largely ineffective management, not to mention a whole lotta personal dysfunction. The typical contemporary law firm is nobody’s idea of a good business model, a satisfying workplace, or a solid bet for long-term future success. It shouldn’t surprise us that women abandon this model in droves. The question we ought to be asking ourselves is, why are men sticking with it in greater numbers than should rationally be expected?

Certainly, there are any number of advantages presented to men by the typical law firm model — we created it in our own image, after all. Head and shoulders above all these benefits is the time- and effort-based pricing and reward system. Men continue to shoulder much less of the burden of family and household care than women do, giving them more time to devote to the firm. And since time is the currency of law firm financial success and the measure of law firm dedication, it’s no wonder that men find the environment attractive and rewarding in that regard. The mystery is why we put up with all the other unpleasant, unresponsive and dehumanizing aspects of the model. Why do we accept and endorse a system that delivers exactly one benefit to us (revenue) at the cost of so many other disadvantages to us, to our erstwhile female colleagues, and especially, to our clients?

These contentions underlie my larger thesis: in the medium- to long-term, women will flood into law firms and into the private practice of law generally, but not because the profession or firms themselves have made various “accommodations” (a dangerous and ultimately demeaning word) to the standard model for women. It will be because that model itself will sink entirely beneath the waves of change, replaced by new approaches that more closely resemble modern business practices. My impression is that women are already a growing and increasingly potent force in modern solo practices, where they can make their own rules. The “solo” ethic will, as time goes on, start to spread to larger legal enterprises.

Inevitably, and especially with the advent of “non-lawyer” participation in the market, law firms will lose their 19th-century trappings of time-based pricing and harshly individualistic compensation systems. They will cease to be clubs of privilege and start to be engines of value and productivity. And very shortly afterwards, not by coincidence, they will start to benefit from an influx of the amazing female talent they have been rejecting for decades. Five years ago, I wrote about a “Moneyball” approach to building law firms that recognized and capitalized on the legal market’s ridiculous undervaluation of women: our destination is a market in which that undervaluation comes to an end.

This will not happen overnight; but the current law firm model is inarguably unsustainable, and when it finally falls away, real shifts in the law firm gender mix should be one of the primary unlooked-for benefits. We can best prepare ourselves for that outcome by hastening the fall of the old model — and by considering the distinct possibility that women, far from constituting a “problem” to be “fixed,” have actually been pointing the profession in the right direction all this time.

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.             

Disrupting the legal education marketplace

Are you old enough to remember when the only way you could send a letter or a package to someone in another city was through the Post Office? Do you remember what it was like to deal with the employees and policies of a company that had a complete monopoly on a vital service? Remember how much you enjoyed that?

Are you also old enough to remember when the only way you could phone someone in another area code was through long-distance services provided by your local telephone monopoly or duopoly? And how you had to wait and call after 6 pm to get a discounted rate, or after midnight for an even steeper discount? How did that work for you?

It’s easy to forget how much technology and globalization have changed and improved our everyday experiences in the last few decades. Today, we take companies like Fedex and Skype for granted. We have trouble picturing a world — a very recent world — in which there was no Ikea, no Amazon, no Samsung, no Starbucks, no SouthWest. You don’t have to use these companies or like their products to recognize that their arrivals changed the markets they entered, created more choice, forced the incumbents to lower their prices or raise their games or change their offerings or all three. And I can presume that you wouldn’t go back to those old, narrow, barren markets unless forced at gunpoint.

Now, take that frustrating, constraining, 1970s-malaise feeling you recall from the old days, and apply it to legal services. Because that’s the way many people and businesses still experience the legal market: one type of provider, one set of rules and procedures, one definition of adequate service. But that’s all about to change:  our cozy little market is opening up, and new players are entering.

These new players, like the Ikeas and Southwests that entered other markets before them, will undermine clients’ existing assumptions about how legal products and services should be created, priced and delivered, and they will find many willing customers desperate for a breath of fresh air. This isn’t really negotiable or reversible. All that’s left for us to decide, as lawyers, is whether we want to wind up as the future equivalent of the Post Office in a FedEx world.

Now, here’s the better news for lawyers: there’s a growing chance that we could experience the same kinds of consumer benefits arising from the opening and expansion of another dusty, moribund market: legal education.

As you know, for all practical purposes, there is one and only one route into the legal profession: a law school degree and a Bar-administered admission process. The degree goes by different names (e.g., Bachelor of Laws, Juris Doctor) and so does the admission process (e.g., articling, Bar exam, solicitor training, Bar admission course). But the basic structure is universal and hasn’t changed for decades: three years of law school followed by a competence assessment that, in most (but not all) cases, is not especially difficult to pass.

The practicing Bar’s unhappiness with the legal education system has been thoroughly documented. But the Bar also has no one to blame but itself. By allowing a law degree to stand as the exclusive means of legal education credentialing, the legal profession has also created a monopoly that works against its own interests. If you want to become a lawyer, you must first go to law school. Legal educators, gifted with sole possession of an extremely lucrative and perennially increasing market, have responded exactly as you would expect any monopolist to respond: jacking up prices, fending off change, and ensuring their own nests are comfortably lined. (Before you start feeling too resentful about that, go back and read the fourth paragraph again.)

Law schools, of course, are currently in the process of watching their pleasure domes start to crack and crumble. Thanks in large part to recessionary forces and changes to the way law firms hire and use associates, US lawyer employment has imploded, and law schools are paying the price. You could argue — I won’t, at least not strenuously — that this is unfair to the schools: they didn’t cause the changes to the market, and if anything, they’re doing a slightly better job preparing students for practice today than they did 10 and 20 years ago. Not that that will help them now — there’s an old saying that when you sow the wind, you reap the tornado.

Anyway, the most recent US law school data is remarkably grim: as you’ve probably read, applications to ABA-accredited law schools are down 20% from 2012 and are on track to nosedive 38% since 2010. If you go back to 2004, the drop is an astonishing 50%. This has hit the legal academy like a hand grenade tossed through a window: Paul Campos has been tracking the resulting panic and shrapnel for several months now.

The problem has become large and serious enough to have caught the attention of the mainstream press: The New York Times, The Atlantic, Forbes and The Daily Beast have all picked up the story, coverage that is just going to accelerate the race away from law school enrolment. I issued a “sell” advisory on law schools 20 months ago, and nothing that’s happened since has changed my mind. (Smart schools still interested in saving themselves should read Bill Henderson’s Blueprint, today.)

That, obviously, is the bad news. The good news is that this market disruption, like every other, can create opportunities for new players and new models. Here are a couple that you should note and encourage.

In England & Wales, now widely recognized as the world’s legal laboratory, apprenticeship is poised to make a comeback in the professions. “At the moment, to become qualified as a solicitor, accountant or in insurance, the typical route involves three years at university, then on-the-job training and professional qualifications,” wrote Skills Minister Matthew Hancock in the Telegraph. “But university is not for everyone. There is no reason why you can’t attain the same qualifications, without the degree, starting on-the-job training in an apprenticeship from day one. So I want apprenticeships spanning craft, technical and professional jobs that open up work-based routes to the top.” The minister cited approvingly an apprenticeship program under development at BPP Law School, which has close ties to the profession.

Now, if you’ve been reading my work for a while, you’ll know that I think highly of apprenticeship, and that I wrote a few years ago about some promising apprenticeship programs at a handful of US law firms. (Here’s the paper I submitted to a Georgetown Law symposium on the subject.)  I imagined and hoped that this was a trend that would take off in a recessionary climate; it did not. But that was apprenticeship as a training method for new lawyers; we’re now talking about apprenticeship as a non-school route into the profession.

Hardly anyone takes that path anymore; but if it could be revived, ideally complemented with a mini-degree that provided grounding in the essentials of jurisprudence and legal theory, then law schools would have more on their hands than just a PR nightmare and a shrinking inventory: they would have competition. And unlike those first two factors, which will spawn only destructive outcomes, competition can and should be constructive for schools. Competing models that threaten to siphon off the best applicants would spur schools to make real changes in their approach to the market — it would give them a target to focus on and a framework within which to reconfigure and rebuild.

Nobody wants law schools to disappear; we want law schools to thrive — but on their merits. Putting a viable alternative up against law schools would motivate them to reconsider their own models, defend their own visions of lawyer preparation, or adapt their approaches to more closely resemble what the successful options offer. Complaining about law schools didn’t work; trying to regulate them won’t work; and putting them out of business is pointless. So give them competition: unleash alternatives that can give them a run for their money, and let them fight their way out of this mess.

A similar sort of innovation may be unfolding here in Canada, which it seems fair to say is not widely recognized as the world’s legal laboratory. But the Law Society of Upper Canada in Ontario has recently done something which could be just as bold, in its own way, as the UK’s move towards apprenticeship.

Law graduates cannot be admitted to the Bar in Canada until they’ve completed a year of articling — itself a form of apprenticeship with a practicing lawyer or law firm. More than a few US commentators have envied this approach and suggested its adoption in the US (or the British solicitor trainee program or German Referendarzeit). But articling in Canada is itself the subject of ongoing controversy, and in Ontario, articling placement — which used to be all but automatic — is now down to about 85%. That’s a problem that the US bar, facing a 55% new-lawyer law-related employment rate, would love to have.

In Ontario, however, concern about the articling crisis led to heated debates and finally, late last year, to the approval of a pilot-project Law Practice Program that would run parallel to articling and provide an avenue to those who cannot land articling positions. The program is not, shall we say, universally popular, and at this extremely early stage, it’s almost entirely speculative anyway. But I think it’s tremendously important nonetheless, for much the same reason as I think the possibility of apprenticeship is important: it creates competition for new lawyer training.

Up until now, articling in Canada has, in a sense, enjoyed a monopoly, in much the same way that law schools and lawyers have. There is only one “apprenticeship” method, one training route, for Canadian bar admission, and that’s the articling process. Knowing this, many Canadian law firms have felt free to offer articling positions without having to worry very much, if at all, about the quality of those positions. All they really had to concern themselves with was the provision of a competitive salary; it was accepted wisdom among lawyers and law graduates alike that the articling experience itself would always be uneven, and that whether you really learned much about being a lawyer would be partly a matter of your own efforts and partly the luck of the draw.

Now, introduce the Law Practice Program into this mix. Suddenly, articling programs can’t afford to be complacent, because now there’s another training option. Providers of the Law Practice Program (it’s envisioned that there would be several) can pitch themselves to the law student market thus: “Law firms won’t really train you to be lawyers, you know. They’ll have you photocopying and doing grunt work and picking up drycleaning. But we will train you, through competitive work placements and practical role-play sessions and other cutting-edge methods for inculcating business skills. We will give you the tools to be employable upon graduation.”

These providers will have to offer and deliver these kinds of benefits, because that’s the only way they’ll be able to make money. In order to attract candidates — and, much more importantly, to produce graduates attractive to employers — they will need to build a training program superior to articling (and based on some reported articling experiences, that might not be terribly difficult). They will have to do more than just be a consolation pathway for students who couldn’t find articles — they’ll have to persuade law graduates of all stripes that their programs are as good as or better than articling and are worth the investment.

And if they succeed — well, then suddenly, we have a race. New lawyer training stops revolving around the tired old question of “Whose responsibility is it?” that we’ve been grappling with for ages. It becomes a question of “Who wants the opportunity?” Which training option is better for new law grads? Which can deliver the best results? Which can draw the best students into their programs and produce the best subsequent employment rates? A market filled with new lawyer training options, competing with each other to attract law graduates into their program, would have many ramifications — the likely end of standard paid training for new lawyers almost certainly among them — but the overall impact on the profession would be highly positive.

That’s why I think the Law Practice Program for the Ontario legal profession has the potential to be a game-changer, and why the suggestion of an apprenticeship route into the British profession is equally significant. Our legal education and admission methods have grown stagnant because they are monopolies, no different from the post office or phone companies of the past. Break up those monopolies — open up these markets and let in some sunshine and fresh air — and you’ll have the first real opportunity for serious reform and improvement in the new lawyer development process.

And if it all breaks right, then just like with mail and long-distance calls, no one will want to go back to the old days again.

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. 

Vulture culture

Tackling this subject, I admit, may simply be an excuse to achieve a long-held goal of using an Alan Parsons Project album as a post title. (Next up: finding a way to smuggle in a Supertramp reference.) But in truth, I was pointed in this direction by a couple of recent developments that revisited the well-worn topic of “law firm culture.”

The first was the most recent Citi/Hildebrandt Client Advisory, which confirmed the increasingly evident fact that for midsize and large law firms, Winter’s Here. Among the report’s contents was this warning:

“Law firms discount or ignore firm culture at their peril … the leaders of a firm whose partners pride themselves on their dedication to public service, a culture of collegiality and tolerance, and a commitment to share profits in a fair and transparent manner should acknowledge the importance of this culture to the firm’s success so far.”

I would be hard-pressed to find a sizeable law firm that demonstrably fits this description in reality, not just in its partners’ imagination. As Steven Harper points out, almost everything about large firms’ strategy and behaviour over the past several years can be described in precisely the opposite terms.

Law firm “culture” isn’t that hard to define, really. Culture is what people at the firm actually do every day. In harsher terms, it’s what people get away with. Culture is what actually happens. A law firm’s culture is the daily manifestation of its performance expectations and behavioural norms — what is encouraged and what is tolerated. So it’s not a matter of law firms “ignoring” culture — every firm has a culture, and most firms’ cultures are remarkably and depressingly similar. It’s a matter of recognizing that the culture that a law firm develops and sustains has an impact on productivity, retention and morale — in many cases, a catastrophic one.

“Collegiality” deserves a closer look, because almost every law firm insists that it maintains a “collegial” atmosphere. Stephen Mayson accurately points out that at most law firms, this is nonsense, driven by a misunderstanding of what “collegial” means:

Typically, partners are confusing collegiality with friendliness and sociability. Collegiate organisations make decisions in the long-term best interests of the firm, they are collaborative, and no individual is more important than the firm. What I hear described, though – most often in firms that claim to be collegiate – is an environment where personal and local interests are usually pursued in preference to the firm’s objectives. Work-hogging, and a refusal to cross-sell, are prevalent, fed by a personal billing and client origination culture. These firms are often low-trust partnerships, where it is not unusual for high billers to hold the firm to ransom or to throw their toys out of the pram when it looks as though they might not get their own way. This is collegiality?

It is not. But it is the culture of the typical law firm — the behaviours that are encouraged or tolerated.

The second development arose from my attendance at the Feeney Lecture at the University of Ottawa Law School, delivered this year by Mitch Kowalski on the subject of the changing legal marketplace. I was struck by the consistent and even predictable reactions from panellists and audience members to Mitch’s portrait of the legal profession’s future, which included a prominent role for “non-lawyer” owners and service providers.

Among the objections was the classic concern that law firms run by “shareholders” or in a “corporate manner” would see their standards and professionalism fatally compromised, and that — wait for it — the “collegial” nature and professional “culture” of law firms would be lost. See the foregoing paragraphs, especially Stephen Mayson’s diagnosis, and tell me precisely what it is that’s at risk here. Tell me how equity partners are any different, for all practical purposes, from non-lawyer equity shareholders. Tell me how the “de-equitization” of “underperforming” partners now being carried out by hundreds of lawyer-owned law firms across North America and Europe is an exemplar of professionalism and collegiality.

I would like to suggest that our positive (if not vibrantly self-admiring) vision of “law firm culture” belongs more to the realm of myth than to reality. There is nothing about an enterprise owned, operated and populated by lawyers that makes it markedly better than any other enterprise, and quite a bit that makes it noticeably worse.  The sooner we shake off our misconceptions in this regard, the sooner we can address, in an honest and grown-up way, what will happen when lawyers are no longer the only (or even the dominant) decision-makers in private legal enterprise. Miguel Pereira and Fergus Payne argue persuasively that law firms possessing an “ABS culture” will be focused primarily on financial performance — a state of affairs that is, in reality, no different than how today’s lawyer-owned law firms approach things. We’d be well-advised to remove the plank from our own eye before hunting for specks in anyone else’s.

Culture is important to law firms, but not in the way lawyers think. We cite “culture” as a bulwark against the unprofessional and uncollegial forces of the corporate, non-lawyer world, as a filter that differentiates us from the crowd. In reality, it seems to me, the tendencies we think we’re locking out with “culture” are often the very things we’re actually locking in.

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 lawyer vs. the law firm

So I’ve been thinking a lot about law firm mergers lately (especially between large Canadian firms and their much larger international counterparts). That in turn has led me to think about cross-selling, why it’s so important to the success of these newly merged firms (and others), and about the relative failure of firms to make cross-selling work. And these in turn have led me to my final post of the year, in which I usually try to assess the state of the legal market and what we can expect in the coming year.

At the end of 2009, I recommended we get ready for the rise of the client. As 2010 drew to  a close, I talked about the emergence of a truly competitive market for legal services. And as 2011 rattled off this mortal coil, lawyers’ increasingly precarious position in the market left me feeling generally apocalyptic. I don’t have anything quite so Armageddon-esque to suggest this year — Mayans notwithstanding, I feel pretty safe in predicting we’ll all wake up on Dec. 22. But I can forecast that a fundamental conflict at the heart of the private legal market will start to be addressed this year: the core, critical, and maybe irresolvable conflict between a law firm and its lawyers.


Let’s arrive at that conclusion by the same route I took to get there, and start with mergers.

Law firm mergers are odd beasts: they rarely have the same causes or produce the same effects as in the corporate world. When businesses merge, the general idea is to combine production facilities and reduce inefficiencies to lower costs while eliminating a competitor from the landscape. When law firms join together, however, they generally don’t conduct layoffs (quite the opposite — they usually boast about their larger workforce), they don’t reduce inefficiencies (more commonly, their inefficiency grows), and the lawyers with whom they’ve merged are encouraged to do more business, not less. Combining two law firms is a little like bringing together two big Lego towers to form a much larger one by adding a few bridging pieces.

So if firms neither seek nor obtain the streamlining benefits of merging, why are they merging in the first place? I posed that question in my article “Why Are You Growing?” in the most recent “Strategic Growth” edition of the Edge International Review, and I couldn’t find a very persuasive answer. I suggested, in fact, that at more than a few firms, merging isn’t so much an outgrowth of strategy as a replacement for it.

I went on to dispute the idea, buried deep among the assumptions inherent in law firm mergers, that when it comes to lawyers, “more is better.” Getting bigger, I observed, isn’t really the point of law firm growth. Becoming more effective, more valuable and more profitable is the point — and when you’re dealing with lawyers, adding more of them could actually interfere with those objectives, because lawyers are hard to manage in any firm and virtually impossible to manage in massive ones.


Which brings me to cross-selling (and to some observations borne out of an online conversation with Toby Brown).

One advantage frequently put forward in defence of global law firm mergers is the prospect of more business generated through cross-selling. With more partners in more offices in more key regions, the theory goes, there will be more opportunity for partners to reach out and generate new work from new partners in new offices, and to return the favour in kind.

It’s an excellent theory, undermined only by a larger practical problem: lawyers rarely cross-sell. In any firm “midsize” or larger — and I’ve now come to define that as any firm where you can’t fit all the lawyers into a workable cocktail party — most partners do not successfully cross-sell, and many don’t really try that hard. In most of these law firms, individual lawyers — not the firm itself — control client relationships. Therefore, a client will be referred internally only if his or her lawyer chooses to make that happen. Quite often, the lawyer does not.

Lawyers, as we know, guard their clients jealously, even from colleagues in their own practice groups. They will make no referral, and especially no long-distance referral, if they so much as suspect that the attorney or practice group to whom the client would be referred might fumble the ball, overbill the client, or otherwise make the referring lawyer look bad and potentially threaten the client relationship.

Now, you can certainly blame partner compensation systems in part for this problem, if they fail to appropriately reward cross-selling, although that’s the least of the sins to lay at their feet. Fundamentally, however, lawyers’ reluctance to cross-sell their partners can be traced to the breakdown of internal relationships and internal trust among a firm’s lawyers — or maybe more accurately, the failure of trusting relationships to develop in the first place.

Even in firms of 30 or 40 lawyers, these elements can be found wanting; but in a firm of hundreds or even thousands of lawyers, in multiple cities, on several continents, that challenge can and does graduate from Herculean to Sisyphean. In firms that big, you simply don’t know most of your “partners,” and you likely never will. Absent a high degree of familiarity and trust, the risks vastly outweigh the rewards for the potential cross-seller. (My Edge colleagues Gerry Riskin and Michael White have written articles addressing some of these issues, by the way.)

Unfortunately, however, it’s not as simple as “fixing” trust and relationships within a large or newly merged firm, assuming that you could. The problem goes deeper than that, and it goes back to one of those buried assumptions about law firms. As a rule, the individual lawyer, not the firm, gets to decide whether or not the client can deal with another lawyer; basically, the client gets referred internally if the lawyer who controls the client feels like it.

When you stop and think about it, that’s kind of strange.

The Lawyer vs. The Law Firm

When you walk into a clothing store, the first salesperson who greets you (even if he works on commission) will happily pass you over to a colleague to answer questions, receive advice, or otherwise be part of the transaction. At a car dealership, the first salesperson with whom you deal (and I can guarantee she’s getting a commission) will be willing to do the same. They’re not doing this because they’re warm-hearted communitarians; they’re doing it because they work for the company, and the company considers that you are its customer, not the salesperson’s. And the company is correct to believe this. The salesperson’s individual interests in your time and attention do not trump those of the company.

“But,” you and every lawyer reading this will instantly respond, “law firms are not clothing stores. In a law firm, the partner works for herself, she’s an independent equity owner, and she might well have pulled in the client herself, and she’s the one whose services will be delivered to the client and on whom liability will rest. She should have every right to dictate what happens to the client with whom she deals.”

And that, to my way of thinking, is the problem. Because a law firm in which this is the dominant cultural belief is not a business. It is not a functional commercial enterprise in any sense with which we are familiar. It is, to be blunt, nothing. It’s a warehouse where lawyers share rent, utilities, and a library, but not risks, rewards, or professional aspirations. It’s a farmer’s market; a neighbourhood yard sale; a souk. Some lawyers still feel like debating the old saw, “Is law a profession or a business?” I’ll tell you this: the typical law firm described above is neither a profession nor a business. It’s a cheap knockoff of both that behaves like neither.

And it cannot stand. Not when so many other real, actual, conforming-to-the-laws-of-enterprise companies are entering this marketplace. In real businesses, the interests of individual product makers or service providers are aligned with and subsumed into the greater interests of the company. In real businesses, personal success and market validation are integrated with the success and validation of the company. In real businesses, the salespeople don’t own the customers. 

This is more than a bug or an inconvenience or a profitability hiccup for law firms: it’s an existential challenge. It goes to the heart of why a law firm even exists in the first place — what purpose the firm serves in and for the market. And it’s creating serious stress at some of law firms’ most vulnerable points. The strain is already showing.

The Pressure Points

Look again at cross-selling. Law firms need robust cross-selling, because it’s almost the only source of organic growth that flows from a partnership format (as opposed to a lawyer’s own individual efforts). Without cross-selling, lawyers must develop business alone, on their own initiative — raising the fundamental question of why they’re even in a partnership in the first place. A law firm needs its lawyers to cross-sell, but it can’t force them to do so, and lawyers consider their clients to be part of their personal inventory. When it comes to cross-selling, therefore, a law firm and its lawyers are locked in an ongoing struggle for control of the client relationship — but for the firm, it’s always been a losing battle, because extremely few firms have built anything approaching a collaborative business environment to enable client sharing. There’s no collaboration at a farmer’s market.

Look again at mergers. In Canada, all the talk is about the decisions by Fraser Milner Casgrain and Norton Rose Canada to accept mergers with global firms that have a large US presence. This has never happened before, because most midsize and large Canadian firms receive huge inflows of referral business from multiple US firms, and tying the knot with one US firm means cutting off all those other streams for conflicts reasons. But let’s press that assumption harder: What will happen to a firm that loses all those referrals? The referral work will likely go elsewhere, yes. The lawyers who received that work will likely leave too. The firm will be smaller. But it will also be more focused, more specialized, more globally integrated — and quite possibly, more profitable for the remaining partners. Because, again, being big is not the point. Being effective, valuable and profitable is.

A law firm that pursues a merger which will surely result in a near-term loss of both referral work and lawyers has made a fundamental decision: the collective interests of the enterprise supersede those of some of its individual partners. The firm is saying: “We accept that this course of action will cause conflicts problems for many partners, some of them insurmountable, and that we may lose those partners and their revenue. But we have a core business objective: to serve X clients in Y markets through the provision of Z services, and that can best be achieved through this merger.” That is not only a gauntlet flung in the face of many powerful lawyers: it is a statement of rebellion against the cultural assumption that lawyers control clients. It’s an assertion of institutional identity and independence by the law firm.

Not many law firms have the wherewithal to try this and succeed. But assertions like these will become more common, because they are becoming more necessary. This conflict has always simmered beneath the surface of law firms, submerged from sight, except when the occasional skirmish erupted above the waterline. But now the entire fight is coming out into the open. Legal services has become a dynamic, competitive, global market, and the main reason so many law firms are struggling within this new market is that they cannot respond institutionally. They are held back by their lawyers, hamstrung by their souk culture, unable to muster enough collective gravity and momentum to make critical decisions. But they’re trying, more than they ever have before. Law firms in the future absolutely must become more streamlined, systematized, managed, automated, and centralized in order to compete — but that’s not what many of their lawyers want. So who wins, the firm or its lawyers? That’s the coming battle.

There is no shortage of conventional wisdom with which to object, starting with the old standby that “Clients hire lawyers, not firms.” And that might well have been true, much of the time, for many years. But I’m coming to conclude that clients acted that way primarily, and possibly only, because that’s how lawyers trained them to act. There has only ever been one source of outside legal services: the law firm. Most law firms have only ever been driven by one strategic imperative: the interests of their most powerful partners. Clients choose lawyers in no small part because that’s what lawyers want them to do. But give clients an actual choice of providers that approach business and client relationships differently — which our incoming competitors will deliver, in spades — and you have the opportunity to create a brand new playing field with a potentially whole new set of rules.

The Outcome

The lawyer vs. the law firm is a fight that’s been spoiling for years, and it seems to me that starting in 2013, it’s on. Once that battle is finally joined and completed, I can see only two likely scenarios for law firms that experience it.

1. The full-service law firm partnership will collapse. There will be insufficient reason for a broad array of lawyers to band together in a partnership when that model provides them with very few business benefits. If your “partners” will cross-sell or refer to you only on a whim, why are they your partners? The large, “full-service,” multi-jurisdictional law partnership will shudder and start to break apart; small, local, intensely interlocked practice groups will peel off and become the new basic unit of private legal enterprise. That result is where all the foregoing pressures are leading right now — if firms cannot gather enough internal cohesion to establish a business-first, practitioner-second culture, then the centrifugal forces that have been slowly pulling law firms apart for years will finish the job.

2. The law firm partner will lose his or her position as the driver of internal legal business. As apocalyptic as that first option above might sound, this would be the truly revolutionary outcome. Law firms require generous cross-selling and enlightened referrals; lawyers control both and resist both; ergo, cross-selling and referrals must be taken out of the hands of individual lawyers, because otherwise the continued viability of the firm is threatened. Under this scenario, the firm wins the war and becomes the primary or even sole driving force behind its business decisions; the cost will be high, measured in an outflow of lost work and departing laterals, and the loss of blood might be more than some patients can survive. But in the larger picture, the cult of the corner partner begins to die off, and a new cultural imperative emerges to govern law firm behaviour.

Unsustainable situations can’t be sustained forever. Conflicts at some point have to be resolved, and there is no bigger conflict within law firms than this one. If law firms are not strong enough institutionally to wrest control of client business from individual partners and distribute referral and cross-selling opportunities in a more strategic fashion, then they lose their primary reason for existence. If lawyers are not strong enough to retain primary control over their sources of legal work, then they stop becoming independent legal entrepreneurs and become the functional equivalent of mere employees.

Either the center will hold, or it won’t. That’s the question; in 2013, law firms will start to learn their answer.

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.

How to kill (or save) a law school

Back in August 2010, I wrote a post called “How to kill a law firm” that continues to receive a steady stream of traffic and responses. Recently, John P. Mayer on Twitter suggested it was time for a law school version of that article. I agree.

My interest in applying a legal education focus to this topic was further heightened by the recent publication of two op-ed pieces by law school deans: This one by the dean of Case Western University Law School in The New York Times and this one by the dean of the University of Ottawa Faculty of Law in Canadian Lawyer. You can also read thorough critiques of each article at The Girl’s Guide To Law School and Slaw, respectively. The articles and their responses neatly frame both the enormous challenges facing law schools and the apparent inability of their leadership to appreciate those challenges.

My goal, I should probably make clear, is not to help annihilate law schools across Canada and the United States — I like law schools, and I hope they prosper. Nor is my goal to create a road map for potential competitors to carry out that destruction — believe me, they don’t need any road map sketched out for them. The schools have all but drawn up the blueprints themselves, although they don’t realize it.

What I want to do is encourage law schools to participate in an exercise around creative destruction. I want them to think: if a new competitor for the role of legal education provider were to target us, how would they do it? If they wanted to knock us down and replace us, how would they go about it? What weak spots and vulnerabilities in our model would they attack? What market needs, unmet by us, would they strive to meet? Then, once they’ve identified their strategic exposures, I’d like law schools to exploit those vulnerabilities themselves first, before the upstarts can do so. The world’s most successful companies, from GE to Apple, do this regularly — they set out to destroy their own business before anyone else can. Law schools badly need to do the same.

Finally, it’s worth explaining who I mean by “competitors.” Most law school faculty and administration would probably dismiss outright the idea that they have any competition at all, except for other law schools that operate exactly the same way they do. This tunnel vision itself qualifies as a major vulnerability, but we’ll let that pass. The primary competitors I have in mind are:

  1. low-ranked law schools in danger of closure and therefore with nothing to lose from experimentation (i.e., the “fourth-place network”);
  2. universities or other licensed educational institutes without a law school but seeking to create one clearly differentiated from the current model;
  3. non-academic business training providers already aligned with the “practical skills” demands of both students and law firm recruiting directors; and
  4. the legal profession itself, through governing bodies or bar associations, moving to create competing legal education programs geared to their needs.

There are almost certainly others out there, especially in the rapidly expanding online education sphere (Solo Practice University has been building its lead there for several years now), but we can start with these four because they’re all plausible present-day candidates for disruptive market entry.

So, with all that established, let’s start noting the weaknesses in law schools’ current approach to the market. As you’ll see, there is no shortage.

1. Price. The first and easiest pressure point to identify is the price of a law school education, which at almost every school in North America has risen by multiples of 100% over the past 15-20 years. More affordable tuition would be a legitimate drawing card for good applicants, and it’s a sign of law schools’ cartel-like behaviour that few if any schools have pursued this path.

Is it realistic to expect a challenger to offer a robust legal education at below-market prices? I think it is, because almost all the factors driving up the price of law school are institutional, not curricular — that is, they have everything to do with internal educational politics or arbitrary external forces, and little to do with the quality and substance of the law degree itself. We’ll examine these factors in #4, below.

2. Faculty. The single greatest impediment to law schools’ ability to change is their faculty. Many if not most law school faculty members have held their positions for decades and are fully insulated from outside pressures by virtue of both tenure and age-discrimination laws. They are researchers and publishers first, teachers second or third. Most have never practised law (at numerous schools, more than two years in a law practice disqualifies law professors from tenure) and they have no interest in the Bar. They fight change almost as a matter of course. They are a millstone around the law school’s neck when it comes to innovation.

It will take at least 5-10 years for attrition to solve this problem at most schools; in that time, new entrants can make their move. Legal education disruptors will identify respected practitioners, retired judges, and even non-lawyer experts to lead their courses. They will train these individuals in 21st-century teaching methods, assign them courses with tightly controlled syllabi, and operate a streamlined and strategically coherent educational system. They will recognize that extensive academic pedigree, admirable and worthwhile as it certainly is, is neither a necessary nor a sufficient qualification to teach the law.

3. Curriculum. Closely related to the obstacle of faculty is the conundrum of curriculum. The first-year courses mandated for students at my alma mater today are the same as when I enrolled 22 years ago and have not changed substantially since the 1950s. The menu of optional courses has expanded significantly, especially those taught by “adjunct” (freelance) faculty, but most are still delivered as lectures and graded by exams, as if everyone involved were still in junior high. But the primary vulnerability is and always has been the paucity of courses that strive to prepare future lawyers in some way for their first few years in the marketplace.

Law professors are fond of saying that it’s the Bar’s responsibility to prepare students for practice, not law schools’. But that is precisely the point they miss — it isn’t a question of responsibility, but opportunity. What courses might a school teach that would differentiate it from other schools and prove more attractive to both students and recruiters? What programs could it create that would bridge the gap between basic legal knowledge and initial professional competence? That’s the opportunity most (but not all) schools continue to miss, and it’s one that new providers will exploit.

4. Status. This is, in some ways, the most important vulnerability, because it goes to the heart of the current legal education system. Defenders of the law school status quo will say that these foregoing points are very nice and all, but they’re also irrelevant: law schools’ ability to innovate is utterly constrained by external factors.

Two factors in particular dominate the conversation, in the United States at least: the ABA accreditation process and the US News & World Report rankings. The former mandates a minimum amount of infrastructure investment to obtain and maintain accreditation; the latter holds so much sway among applicants and recruiters that schools are forced to act foolishly (and sometimes illegally) to squeeze their programs into the rankings’ pre-defined mould. A third factor, receiving increasing attention recently, is the role of the university itself, which counts on the law school as a steady and ever-increasing source of revenue and which places immense pressure on law school administrators to keep the money flowing in.

Combine these external forces with the internal albatrosses of faculty self-interest and institutional inertia, the defenders say, and there’s no blaming law schools for acting the way they do. And perhaps they’re right.

But I can tell you this: that doesn’t matter an iota to the disruptors that are targeting law schools right now. They’re thrilled to see so many arbitrary constraints on legal education incumbents, because they can choose to be entirely free of them. They can ignore ABA accreditation or the US News rankings if they wish. They can refuse to enter a losing game, to accept the same shackles that are paralyzing law schools. Think about it: why would they want to acquire the incumbents’ handicaps?

The biggest advantage that legal education disruptors have today is that they can enter the market unencumbered by the legacy burdens of law schools. They don’t have to be big, important, recognized and expensive — they don’t need “status.” They can be small, modest, flexible and affordable — or at least, they can start off that way. They can align their strategies with the interests of their target market, not those of their teachers or their affiliated academic institutions. They can negotiate directly with Bar admissions officials and satisfy them as to both the academic and practical merits of their degrees. They don’t need to compete for all “the best and the brightest” applicants, whatever that means: they can target the students they want to attract and the employers (law firms, law departments, governments, individual clients) they want to connect those students with.

Innovators don’t duplicate the existing model; they improve it. No new private legal enterprise today would copy the AmLaw 200 partnership model, and no new legal education provider would copy existing law schools. Disruption in legal education is poised to come from innovators that reject the standard assumptions about what a legal education provider looks like, where it’s housed, who it employs, who it recruits, what it teaches and how it’s taught.

That, I think, is how you kill a law school. You come to understand, better than the law school does, exactly what business it’s in, exactly what its inventory is, and exactly who its customers are. And then you figure out where the law school has failed to meet those needs, and you rush to fill the gap.

So, then — how do you save a law school? If you’re in a school today and you find this scenario frighteningly plausible, you’re probably wondering what you can do. Here are my brief closing suggestions about self-destructing a vulnerable model.

1. Make it clear that you’re on the side of the angels. Law schools are weathering one of the most intense instances of continuous negative publicity the legal marketplace has ever seen, although many schools seem blissfully unaware of it. Don’t underestimate the power of publications like Above The Law or the “scam blogs” to create the lens through which your markets perceive you. Right now, many law schools are viewed (with some justification) as either actively antagonistic to students and the profession, or quietly complicit with those that are. As you kick off your efforts to reinvent your school, make sure that your honest, well-meaning efforts are publicized and that you are seen to be on the “reform” side of the ledger.

2. Send differentiating signals to both recruits and recruiters. Law schools get into trouble when they forget what business they’re in: getting paid by students to help them obtain gainful employment in the legal field. (Sorry, but that’s what their business is.) Most law schools have forgotten this, and maybe yours has, too. Those few law schools that have achieved clarity in this regard are carving out new brands that will appeal to these players (Washington & Lee for its practice-based third year, Michigan State for its computational legal studies, University of Miami for LawWithoutWalls, etc.). Create a standout innovative feature — a bridging program, a CPD offering, an Innovation Center, a solo incubator, or something brand new — and join with a private-sector partner to deliver it.

3. Change the weather around your faculty. Intransigent professors, in many cases, may simply have to be waited out for a period of generational change. But there’s no reason you can’t accelerate the attrition process. Encourage changes to the school’s strategy and direction, introduce more practice-related courses, increase dialogue and project partnerships with practitioners and in-house counsel, provide more guest-lecture spots for local sole practitioners, and so on. Basically, change the environment surrounding your faculty — the “tone” of the school — wherever you can. Your faculty members might still consider the law school to be their retirement property, but if the weather clouds over, they may be motivated to move to sunnier climates sooner rather than later.

4. Think hard about blowing off the US News rankings. Most law deans would probably blanch at the thought of dropping out of the US News lists, fearing a catastrophic response from both applicants and recruiters. But I think every school should at least consider it, if for no other reason than to regain some self-respect and control over your destiny. Look closely at the US News criteria and ask yourself: do they align with what we’re trying to do here? Is it fair to our students, our faculty and our mission that we dance to this tune? If the answer is no — and in many cases, it will be — then I think it’s time to leave the dance floor. Build an airtight publicity and communications campaign explaining why you’re ignoring US News from now on, with supportive testimonials from high-profile employers, and test-drive it with major donors. Then go do it.

5. Think equally hard about whether to keep ABA accreditation. This would be far more difficult for most law faculties to justify dropping, and maybe impossible, given various jurisdictional requirements. But the same principles that apply to US News apply here: do the requirements of ABA accreditation line up with the key strategic drivers you feel your law school must feature? If they don’t — if they cause you to spend more than you can afford on things that don’t improve your educational experience — then ask whether the risks of deliberately and strategically withdrawing from (not losing) accreditation outweigh the benefits. The ABA has been talking about switching to output measures in accreditation for years now, and we shouldn’t expect any progress for more years to come. You might not want to wait that long.

These are five places where a law school can begin the process of exploiting its own vulnerabilities and reinventing its own model. Whether and to what extent these are practical for any given law school will depend on its specific circumstances. I can only say this: the traditional law school model simply doesn’t serve the legal market anymore. Whether it’s new entrants or familiar incumbents, someone is going to replace it with something better — and soon.

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.

Why is your law firm merging?

What do you think of when you read the phrase “a large law firm”?

What type of law firm comes into your mind? How many lawyers does it have? In how many jurisdictions is it located? What is its annual turnover? How you answer these questions will vary according to your own market and how that market has shaped your expectations around size.

If, like me, you’re based in Canada, a large law firm generally means an entity with more than 500 lawyers and a substantial presence in four or more major cities. (At least, up until this week it did; but after Fraser Milner Casgrain agreed to join SNR Denton and Norton Rose announced its merger with Fulbright & Jaworski, that definition may be changing — here’s a brief video of my thoughts on those two mergers.) But “a large law firm” will mean something different in India, Australia, the United Kingdom or the United States — and it will vary again as between Delhi and Jaipur, Sydney and Perth, London and Glasgow, New York and Denver.

No matter how you measure size, however, you would probably agree that the world’s biggest firms are behemoths. They employ more than 2,000 lawyers (sometimes many more), they maintain more than 25 offices in numerous countries, and they generate in the neighbourhood of $2 billion in revenue every year. Norton Rose, following the completion of its Fulbright merger next June, will have an astonishing 3,800 lawyers in 55 offices worldwide. These are our profession’s giants, the legal colossi of the globe.

Now, stack the planet’s biggest law firms up against the Big 4 accounting firms. George Beaton of Beaton Consulting in Australia did just that in an article published earlier this fall. Each of these four firms, George pointed out, employs upwards of 100,000 people. The smallest of the four generates $20 billion annually. Each is larger than many of its big clients. If you merged the world’s two largest law firms and gave the new enterprise 5% annual growth, he noted, it would take the new mega-firm 17 years to reach the $10 billion mark. It can be done, and it may very well happen. But it won’t be overnight.

So when we talk about “large law firms,” we need to remember that size is relative. The very last company listed in the most recent Fortune 500 reported annual revenue in the $22 billion range. Our largest law firms are pikers by comparison.

There are plenty of reasons cited to explain why law firms seem to have a natural size limit, most prominently conflicts of interest rules and other ethical or regulatory constraints. Personally, I think that’s an excuse: if we really wanted 50,000-lawyer law firms spanning the globe, we’d have found a way around our self-imposed regulations before now.

The real explanation, to my mind, is that law firms can only grow so large before they transition from “difficult to manage” to “utterly unmanageable.” Law firms of all sizes are unwieldy collections of ferociously independent and self-interested lawyers famously reluctant to place organizational gain above personal advancement. These are character traits, it should go without saying, deeply inimical to building a world-class enterprise.

I once had lunch with a partner in a Big Four accounting firm, and I noticed that he constantly spoke in “we.” He talked first and foremost about the firm’s work and the firm’s objectives, the firm’s future plans, competitive strengths and long-term strategies. His own expertise was important insofar as it contributed to and reinforced what the firm was doing. Contrast that with the way many lawyers usually talk: in the first-person singular. They refer to their law firm not as the strategic core of their work, but as a beneficial platform or vehicle for what they do. The firm’s attributes are important for how they support the lawyer’s personal focus and expertise, rather than the other way around.

That’s why, if you’re looking to build a really huge law firm — whether you go the full merger route or take the Swiss Verein path or choose some other way there — you’re probably going to want to find a way to reduce the importance of lawyers in revenue generation.

Start by asking yourself: why do we want our firm to be bigger? Why do we want to expand? There are plenty of good answers to that question, most of them to do with serving multinational clients, following them around the globe, picking up new business in emerging economies, and so forth. There are also bad answers, including hubris, management ego, and expansion as a substitute for strategy.

But if you’re looking to get bigger so that you can better serve your clients, then maybe, as my Edge colleagues Pam Woldow and Doug Richardson suggest, you should ask your clients what they think about that. Chances are they’ll tell you that they’re not terribly excited by the prospect of their firm getting bigger. Very few people have ever found themselves saying, “Why yes, I’d love to have more lawyers.”

Moreover, as Gerry Riskin and Mike White explain, simply adding lawyers in another city or state or country is no guarantee that a client with business in that jurisdiction will automatically give that business to you. Think about it: if a competitor opened up an office in one of your current locations, would you expect your own clients to instantly decamp to the competition’s new office? Wouldn’t you be shocked and outraged if they did? Then why would you adopt expansion strategies that employ exactly that line of reasoning in the other direction?

Here’s the thing: Growth in a law business is not the same thing as adding more lawyers. Law firms do not exist in order to provide steady employment to the maximum number of lawyers — or, if they ever did, they don’t any longer. Law firms exist to provide legal services to the market in a cost-effective and profitable manner. “Adding more lawyers” is no longer the first and only way to make firms bigger and better.

Technological advances are disrupting many traditional ways in which legal work is done. Automated contract creation, e-discovery packages, data-crunching analysis systems, expert applications that answer regulatory and compliance questions, online dispute systems powered by game theory — all these programs and functionalities are available on the market, right now. They do work that lawyers used to do. Full stop.

Similarly, disruption has come to the legal talent model. If you can get good, solid work from a contract lawyer, or a lawyer in Mumbai or Manila or Belfast, or in an innovative firm like Axiom Law or Keystone Law, or from the lawyer’s own home — and you can — why would you put that lawyer in your expensive offices, on your full-time payroll, with salary and benefits and overhead? What’s so all-fired great about having tons of lawyers on hand?

The answer to that question used to be self-evident: Leverage. Billable hours. Profit generation by the simple expedient of adding bodies to files. Those days, as I’m sure you’ve noticed, are gone. The business rationales that promoted “lawyer growth” as a stand-alone and sufficient profitability strategy are gone.

And lawyers, as I noted above, are often stumbling blocks to growth. Lawyers thrive on being big fish, and the bigger the pond, the smaller and less satisfied they’re going to feel. Lawyers want control over their environments, and as the environment expands, their control lessens. Expansion requires short-term risk for long-term gain, and lawyers tend to dislike both. Lawyers are hard to manage, and thousands of lawyers are thousands of times harder to manage. There’s a pattern emerging here.

“More lawyers in more offices in more locations” is not an end in itself. More revenue, higher efficiency, and greater profit, all delivered courtesy of satisfied clients — that’s the end you have in mind. Mergers and quasi-mergers might well be the perfect vehicle to get you there. But there are other routes, too.

If you want your firm to grow, then you need to clarify exactly, precisely, in show-your-work detail, why that is. And you need to remember that lawyers are no longer the only or best available driver of revenue in law firms. I suggest you take these two thoughts with you into your next law firm strategy meeting.

[This article appears in the Fall 2012 edition of the Edge International Review, a special issue devoted to Swiss Vereins and other innovative growth strategies for law firms.]

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 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.