Summary: Mergers and new hires have permanently altered the traditional law firm model.
According to Executive-Grapevine.com, law firms are changing their structures—forever.
Some are entering mergers and becoming giant firms. Others are making appointments in hopes of gaining momentum. No matter what a firm is doing to stay current in the present day legal era, the entire legal realm is changing.
- See Law Firms under Pressure to Change for more information.
John Pritchard, the founder of Piper Pritchard, an executive search and consultancy firm that works with the legal sector, weighs in on the ongoing changes. James Whitworth, the managing director of the firm, joins him.
Mergers have become especially popular in recent years, and this trend will likely continue. This change is primarily due to clients demanding services that include multiple jurisdictions. In addition, firms are being pressured to offer a wider range of services within certain jurisdictions. To draw national and even international attention to these deals, the firms must be both strong and of a substantial size. Due to major differences in partnership structures, the biggest law firms will not be as affected by this trend, but for mid-level firms, mergers are a popular option. Of course, firms that specialize in litigation may be prevented from merging, due to the potential for conflicts of interest.
- See Law Firm Mergers: Why Law Firms Join Forces for more information.
As for lateral hiring, many firms have used this tool to fill weak spots in their firms. Hiring new attorneys is much less risky than merging with another firm, and it can still provide a firm with a return on its investment. Hiring a renowned attorney demonstrates to clients that the firm is strong and has an edge over its competitors. In the past, many firms hired established partners so that they would bring new business to a firm. However, in some cases, clients are managed by several partners, and the departure of one partner does not necessarily mean the client will follow. Similarly, a partner’s transfer to a new firm may impact a firm’s culture. Certain financial moves may actually hurt partner relations. Therefore, many firms target attorneys who will contribute to the long-term success of a law firm. For example, those who have worked with institutional clients are a great hire, because their skills will transfer to a new firm.
Of course, in today’s legal market, valuable talent is often hard to come by. Many partners would rather remain with their current firms instead of moving to a new one, since, even for the most valuable attorneys, a career move is always a risky undertaking. Typically, both the firm and the new attorney must come to a mutual understanding about the value of a new relationship.
Legal Executive Institute adds a number of other models law firms should try as they pursue success in the new legal era. Each of these models is interrelated.
For example, some firms can try the service model, which changes the way the firm approaches client service. Traditionally, firms have been too expensive, with too little emphasis on client services. Firms should think about the optimal way to help clients reach their goals, of course taking relevant factors into account.
The resource model focuses on building a mix of individuals, technology, and collaboration with third parties. A smaller group of partners and partnership-track attorneys should be implemented. Instead, firms should increase the number of career associates, flex-time attorneys, and other professionals. When these firms also optimize using technology and collaborating with third parties who can provide efficient services, the firm’s overall costs will be reduced, and the quality of the work that is produced will be excellent.
The financial model does away with the heavy reliance on the billable hour. Rather, firms must base a financial model on the value of services provided. This also generates healthy revenue.
The pricing model requires that firms must price their services based on the value delivered, instead of an attorney’s billable rate. After all, resources will be delivered by methods other than attorneys’ work, so the billable hour will eventually become obsolete. Therefore, fees should instead be based on outcomes. Perhaps a fixed fee for representation, or for reaching certain milestones, would be optimal.
The investment model requires firms to consider investment in research and development. Firms must fund new ideas, technologies, resources, and processes to maintain their relevance.
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