This is Not Your Father’s Law Firm

by | Jul 15, 2013

Note:  the following is a contributed post by Micah Johnson

Several weeks ago, I had the privilege of attending the CounselLink Annual Customer Conference. The “privilege” part is sincere. It’s a valuable learning experience any time you get the opportunity to sit down and sample the opinions of inside and outside counsel … even more so when they’re clients.

One panel session in particular stuck with me. With a lofty title – Developments in Law Firm Structures and Business Models – it didn’t sound like it would be as exciting and interesting as it really was.

The insights I captured gave rise to the header chosen for this blog post. What became apparent during the panel session was a notable fact: there are law practices growing and building their reputations today which no longer fit the standard definition and traditional boundaries of a typical law firm. The model has changed; and, depending on your point of view, this news is:

  • disturbing (why do things need to change);
  • welcome (it’s about time);
  • or, somewhere in between.

These new-age firms share a common goal of finding a better way to deliver more value in addressing client needs and interests. Some groups have taken note of the recurring concerns expressed by corporate counsel. “Help me reduce spend, and increase the contribution our legal department makes to leadership and the whole company.”

Aiming for a higher value usually involves adopting different organizational alignments to modify cost structures, and foregoing billable hours in favor of an alternative approach. Two panel members from the CounselLink Conference session served as prime examples:

  • Clearspire: From an organizational basis, this firm is actually two separate companies. One is focused on the practice of law; the other handles all the backend operational support for the business side. In many ways, the practice models itself after ACC Value Challenge principles. Alternative Fee Arrangements (AFAs) are standard; transparency is a cultural norm; and the “value” goal is approached through better outcomes, more predictability and lower costs.
  • Valorem Law Group: This group has adopted a different model, favoring a flatter organization that eliminates the typical structured pyramid with multiple levels of associates and junior lawyers. In fact, there are no junior lawyers, very few associates, and a core group of partners. Collaboration is the guiding rule by which work gets done. Valorem only uses fixed fees and regularly shares risk with clients by tying a portion of their fees to success measurements.

Do these practices represent the new standard definition for 21st century law firms? Honestly, the jury’s still out.

Our legal industry remains in a state of transition. It takes time to change cultural norms and overcome years of tradition. We need additional data points to validate unproven pricing and profitability models. In sum, more work remains to be done. In the final analysis, customers will cast their business “votes” and determine which new models are destined for a long and prosperous future.

Despite the transitional state, it’s reasonably safe to make a couple of predictions.

  • The industry will not be moving backward to the same old models and ways of doing business from the past. They have served their purpose.
  • There will be many more innovators and pioneers like Clearspire and Valorem who embrace change, take risks and lead the way.  We need and applaud them, and support their noble efforts to create new models that are more appropriate for the times. The entire industry has a vested interest in getting it right.
Contributing Writer
Contributing Writer

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