In-house Jobs Will Increase During the Recession
Like every other aspect of our economy, the current recession will impact the legal sector. It is not all doom and gloom, though. Unlike many other job sectors, areas of legal employment will see a wealth of new jobs in certain areas. Companies will hire more in-house legal counsel and support staff, but it might force large firms that have resisted change to alter their business model.
Before the recession, many firms were already experiencing the need to reevaluate how they conducted business. Most large firms have seen flat or declining demand, coupled with stiffer competition. Explosive growth in technology has made the day-to-day practice of law less mundane and labor-intensive. Law firms have found themselves in increasing competition with in-house general counsel and other firms who have incorporated technology to accomplish more work with less billable hours.
Despite age-old loyalty, businesses are bound by their bottom lines. When a company or corporation can slash their legal costs by using in-house counsel or legal practices with innovative ways to cut costs, they do. The legal sector has long found itself insulated from change by the laws of supply and demand. There remains a need for attorneys across all aspects of business, so firms could continue practicing law without adapting to the marketplace.
That will change with this recession. The economy has had a long run in the bull market territory, which has driven the growth of new businesses. These businesses, many of them specializing in some form of technology, will need to cut corners and save on costs wherever possible during this recession. The most profitable law firm clients, such as corporations and start-ups, will reevaluate how much money they spend on legal counsel, and many will determine the profitability of establishing an in-house legal department.
Why will the legal field see growth in in-house legal jobs?
In-house general counsel is not a new concept for larger corporations. However, even corporations with significant in-house legal options still needed firms to handle specialized niche areas of legal practice. That is changing. Companies realize the value of being able to keep all their legal work in-house, and the recession will feed the need to pursue economic, legal solutions.
Economic turmoil inevitably leads to increased lawsuits and legal maneuvers. As companies seek to remain solvent in a challenging economy, the need for legal staff will increases. A struggling economy means layoffs, corporate bankruptcies, investigations, and lawsuits related to each of these. The legal repercussions from a recession will keep streamlined in-house legal counsel busy in the trying days ahead.
The most common lawsuits companies see during a recession include labor and employment law and personal injury cases. Both types of lawsuits increase during economic downturns. The causes for increased suits are complex and range from safety violations made in the name of efficiency to battling false claims by desperate employees.
Each industry and region has unique circumstances that expose them to legal risk during economic hardships. Tech firms see more IP disputes, while financial institutes see an increase in security incidents. Surprisingly, legal problems also have geographical boundaries. For instance, companies in the North deal with environmental law, while the South sees more class-action suits and product liability claims.
Geographic differences in the legal needs of companies also lend themselves to the benefit of using in-house counsel that can specialize in the types of cases most often seen.
Why is in-house legal counsel set to expand rapidly?
Companies like the control of setting their own culture, philosophies, and performance metrics for legal staff. When hiring outside counsel, they have very little control over how the work gets done. Outside counsel, in corporate culture, is more frequently being viewed as unnecessary bloat.
Since the financial crisis of 2008, legal work has migrated to in-house positions. The concept of in-house general counsel has morphed into an in-house full-service legal team. Even mid-sized companies have found it more economical to establish in-house legal teams where the company can dictate technological advances and the use of costs saving tools like skilled paraprofessionals such as paralegals and legal assistants to reduce costs.
Unlike law firms, in-house departments have already transitioned to a more streamlined environment where they accomplish more with less. With the explosive growth seen over the last decade, the recession will leave new start-ups and established corporations all struggling to cut corners and remain solvent in an unsteady market. Creating, or growing, their in-house legal teams will allow them the flexibility to adhere to a legal budget strictly.
During this recession, legal spending will face scrutiny as businesses are forced to tighten their proverbial belts. During the 2008 financial crisis, legal practitioners did not feel the pain as significantly because the already fading concept insulated them that a legal professional was needed for virtually all aspects of a business. Now that technology, enhanced by artificial intelligence, can read, understand, and improve contracts and AI can do legal research and analysis, the playing field has changed.
What does the recession mean for traditional law firms?
Practicing law will become a less self-regulated industry and will instead become consumer-driven. Corporate consumers will be in the driver’s seat, which will profoundly impact firms that have held on to archaic models. Consumers of legal services will now be the ones to determine value, and large firms will have to embrace significant change to remain competitive.
When legal counsel is required for corporate clients, firms will find themselves in direct competition with in-house legal departments that are technologically advanced and have already had the fat trimmed before the recession.
Law firms do have an advantage in having specialists in legal practice areas. In-house firms frequently retain specialist for highly relevant niches, but outlier cases arise. When they do, businesses with robust in-house legal departments still need a firm to handle situations that involve a specific niche. That is a small consolation for firms who will see a significant loss of corporate clients as they transition to in-house counsel.
Law firms will find themselves faced with the challenge of providing faster and more comprehensive service at lower costs. The days of using associates to do the same tasks a paralegal can do, at a fraction of the costs, are dissipating. To make up for the loss of revenue that will result from forced competitiveness, firms will have to attract new clients and offer expanded services.
What's the final result?
Significant changes to the way law is practiced are long overdue. The recession will strip away the mentality of “because it is how we have always done it.” Technology that offers value inefficiency is here to stay, and most legal practitioners will have no choice but to take full advantage of the technological advances to remain both relevant and competitive.
The entire legal industry will be forced to reconcile with becoming a service provider and compete on the global stage. Client-centricity and retention will be at the center of the changes, driving positive competition for market share. Delivery models will change to fit demand, and corporate attorneys will have to reckon with a truly global marketplace.
