For decades, the legal industry had a reliable look about it.
Law firms charged by the hour. Lawyers started out as associates and vied for one of the coveted equity partner positions with an ownership stake in the firm. Even if you’ve never engaged such a firm yourself, you may have witnessed the model in movies or television dramas.
Partners and associates, sometimes by the hundreds, cranking out work product and by-the-book services to plump up the firm’s billable hours, along with its bottom line. The system is hierarchical, profit-driven, inflexible—and expensive. This model eventually came to be known as ‘BigLaw’.
But a funny thing happened on the way to globalisation in a changing economy: The system began to fail.
BigLaw firms began to implode at an alarming rate around the time of the global economic collapse of 2008. Layoffs, dissolutions, and bankruptcies marked the rapid decline of an institutional structure that had sometimes seemed unassailable.
Even before the financial crisis, however, the seeds to the law industry’s inevitable evolution had been planted. We’ll be taking a look back to see how changing technologies, societal expectations, and disruptive business models have resulted in today’s NewLaw revolution.
First, let’s review a brief history of the legal profession’s evolution.
The History of BigLaw in a Nutshell
The practise of law wasn’t always based on the idea that bigger is better and billable is boss.
Solo practitioners historically made up a large percentage of the legal profession. Before the first half of the 20th century, lawyers were often generalists in small firms who charged flat fees.
But after the second World War, the focus began to shift to a dynamic that saw firms divided into ‘rainmaker’ partners, who could bring in business through their own reputations and connections, and associates, who were the workhorses of a firm, always mindful that their ability to make partner depended on how much they advanced the firm’s profitability.
By the 1980s, gargantuan, multi-departmental firms that billed by the hour were all the rage. They were well-organized, departmentalized, and highly stratified. Partners wielded power within the firm and associates worked hard to improve their chances of making partner someday.
What Is the Traditional BigLaw Firm Business Model?
A breakdown of the traditional law firm model looks like this:
- The business is formed as a partnership
- A limited number of lawyers will make equity partner
- This limit creates intense competition among lawyers
- Lawyers must meet or exceed billable hours targets
- Legal work is charged by the hour
- Hourly rates are structured for profitability
- Rates are tiered by seniority of the lawyer performing the work
There are inherent problems with this type of system. A client must trust the firm’s lawyers to pursue the client’s best interests. However, the client’s and the lawyers’ interests are in conflict.
Basing a law firm’s profitability on the number of hours it is able to bill to clients means that the more hours worked, the more money the firm makes. This naturally rewards a lawyer for spending more time on a project than is warranted. The quality of a lawyer’s work may suffer, even as the quantity, based on hours billed, increases.
It is also difficult for a client to budget for costs when the work performed is charged hourly. This situation increases business risk for clients who are relying on the law firm to manage their legal matters.
BigLaw was an unsustainable model. Clients were becoming better-informed and demanding services that more closely fit their needs and budgets. Increasing globalisation created intensive competition for legal services in the worldwide market.
Something had to give. A revolution was on the horizon.
Birth of a Revolution
As early as the 1990s, there were signs of major upheaval in the industry.
Advances in technology provided ample opportunities for innovation across the business spectrum. The creation of online legal document services became a toehold in the door that would soon spring wide open, allowing a flexibility in providing legal services never seen before.
Market-driven forces, spurred by client demand, led to a relaxation of laws regarding what providers of legal services could and could not do. The idea of what a law firm could – and should – do for its clients began to transform.
The industry began to use terms like ‘alternative legal service providers’, ‘legal process outsourcing’, and ‘unbundled legal services’ to describe some of the new approaches to law. Brick-and-mortar edifices gave way to virtual workspaces.
Lawyers dropped out of the make-partner-or-else rat race and chose to freelance as ‘supertemps’. Alternate fee arrangements began to supplant hourly billing. Clients demanded, and got, more flexible terms. The face of law was changing and the revolution was at hand.
The major difference between the old way of practising law and the new dynamic is flexibility. Practitioners can fit their services to the needs of clients rather than the golden idol of billable hours. The focus rests on a combination of technical know-how, legal expertise, and business acumen.
Appropriately, this novel way of looking at legal services with its multitude of possibilities is called NewLaw.
The basis of the NewLaw firm is grounded in the concept of disruptive innovation. Disruptive business models disrupt existing markets by creating ground-breaking new markets and value networks. This notion underlies the foundation of
NewLaw, which has redefined what is possible in the law industry.
What, besides the way services are billed, makes NewLaw so different? The list can be extensive, but the primary elements of a NewLaw practice include:
1 – Bespoke services with clients’ needs at the centre – Services can be scaled to the client’s requirements and budget. If the typical way of doing things is not a good fit for the client, a NewLaw lawyer will work to find a better way. Creative solutions are emphasised over tradition.
2 – Focus on building strong client relationships – One of the top reasons to hire a NewLaw firm is the lawyer-client dynamic. Trust is paramount, and the old model, which pits a client’s best interests against her legal adviser’s need to bill more hours, does not necessarily engender trust. The NewLaw paradigm, on the other hand, is a client-centric approach that alleviates this conflict.
3 – Flexible services and scheduling – On-call, remote, and on-site services: think of a lawyer who practises under the NewLaw model as your business’s own ‘in-house counsel’. Whether all the services are being handled online, at your place of business, or at the NewLaw firm’s location, the effect is that of having your own legal department at your disposal when you need it—and not when you don’t.
4 – Cost transparency – Freed from the billable hours strictures of a traditional law practice, NewLaw firms offer clients solutions they can afford. Predictable legal costs allow businesses and individuals to free up capital for investment that might have been restrained under a less-predictable framework. Working with a legal adviser to find affordable solutions also improves the trust on which the lawyer-client relationship rests.
5 – Technology and cloud-based solutions – There’s nothing stodgy about the NewLaw model. Cutting-edge technology, combined with the latest in online access and cloud-based services, improves efficiency and workflow. High-tech solutions have significantly disrupted the delivery of business services, and the legal field is no exception. Once billing by the hour has been removed from the equation, working more efficiently is an advantage for the lawyer as well as the client.
The result of the NewLaw paradigm is a system that brings down costs while delivering greater quality of service and client satisfaction.
It’s Not a Size Thing
While BigLaw is often used to describe large law firms employing perhaps hundreds of lawyers, within the changing dynamics of the legal industry nowadays it can also be applied to the traditional billable-hours model, regardless of size.
As demonstrated by the points we’ve covered, NewLaw is, quite simply, a very different model from BigLaw. It’s a client-centric approach that starts with the question, ‘What does the client want?’
The pyramid structure of a BigLaw firm is out. Billable hours are gone. Massive office overhead is replaced by more boutique services. NewLaw lawyers often visit clients at their place of business, improving access and convenience.
The only major element of the traditional model that’s been retained is exceptional talent. NewLaw firms seek out top lawyers whose focus is on delivering results to a client, rather than serving up paid invoices to the firm’s equity partners.
NewLaw lawyers often work flexible hours, which not only allows a firm to match supply to demand but results in lawyers who can bring creative minds with fresh ways of thinking to the table—not tired brains bogged down by 100-hour per week workloads.
The result of the NewLaw revolution is a vastly improved legal system that better serves both its clients and lawyers. It’s a winning solution for everyone.