Law firms are getting older, wiser and futuristic. Like any major industry today, the legal industry is operating in a wildly different and technologically advanced world. Because of this, law firms are adapting to changing times by slowly gravitating toward a new way of doing business, which includes embracing virtual workplaces and new fee structures.
When it comes to creating the next generation law office, law firms are all in a race to be second, as most do not want to be on the bleeding edge of change.
“When it comes to creating the next generation law office, law firms are all in a race to be second, as most do not want to be on the bleeding edge of change,” says Lenny Beaudoin, senior managing director and co-leader of CBRE’s Workplace Strategy practice. “Nobody wants to be first. It’s a risk-averse business.”
Whether law firms want to be the first or not, the new dawn for the legal world is already here.
The rise of automation is already impacting legal tasks. A more remote workforce is impacting how and where attorneys work, while alternative fee arrangements and the rise of non-traditional law firms have impacted the traditional billable hours pricing model.
“Some of the dynamics in these law firms have had to adapt to be able to address changing expectations among attorneys,” Beaudoin says.
The legal profession is getting older. An estimated 16 percent of partners will retire in the next five years, with an additional 38 percent expected to retire in the next decade, according to The American Lawyer.
Jobs for recent law school graduates, meanwhile, have slowly gone up. The overall employment rate for law grads from the Class of 2016 reached 87.5 percent, a 0.8 percent uptick from the year before, according to the National Association for Law Placement (NALP).
Rapidly retiring baby boomers are creating challenges for law firms when it comes to succession planning. The low national unemployment rate, at 4.1 percent in October 2017, is creating intense competition for attracting and retaining skilled talent, according to the 2017 CBRE Research report, Legal Sector Trends in the United States: Witnessing Change.
As older partners and baby boomers gradually retire from law, so, too, is the traditional billable hour pricing model. Part of the reason is because clients are demanding lower costs, which can mean that upwards of 90 percent of law firm work is done outside the billable hour model, according to the 2017 Report on the State of the Legal Market by Georgetown Law’s Center for the Study of the Legal Profession and Thomson Reuters Legal Executive Institute.
As companies and clients globalize, they expect to outsource providers like legal services, which increases the amount of cross-border expertise law firms need to remain competitive.
“The global financial crisis put a lot of pressure on margins, which is why we are beginning to see the adoption of the alternative fixed-fee models. Instead of having escalating billable rates in time, organizations in procuring legal services are putting caps on those amounts, which underscores growing pressure on the bottom line,” Beaudoin says.
In Deloitte’s 2016 research report, Future Trends for Legal Services: Global Research Study, 55 percent of clients are currently reviewing their legal suppliers or will do so in the next 12 months.
As companies and clients globalize, they expect to outsource providers like legal services, which increases the amount of cross-border expertise law firms need to remain competitive, per CBRE Research.
“The law firms we’ve talked to are about expanding their global reach rather than decreasing it. Correspondingly, they need to be in the places where their clients are taking them,” says Beaudoin, who co-authored the CBRE Research report.
Turning to Tech
The rise of automation, particularly artificial intelligence, is already impacting traditional legal tasks. Mobile devices, virtual networks, video conferences and cloud storage have created a “virtual workplace that has changed employee expectations of where and how they work,” according to the CBRE Research report. How far-reaching the impact of technology is in the legal workspace is yet to be seen. While technology has not replaced the kinds of tasks typically done by in-house lawyers, 52 percent of attorneys expect this to happen over the next five years, per Deloitte.
Lawyers who telecommute to work are changing the dynamic of law offices, where attorneys were once expected to spend night and day in the workplace.
For instance, natural language processing (NLP), an artificial intelligence technique, can be used to scan and predict relevant documents for a case.
Lawyers who telecommute to work are changing the dynamic of a law offices, where attorneys were once expected to spend night and day in the workplace.
“I think some of the ways that law firms operated in the past in terms of rigidity was around how lawyers managed their daily routines. Technology gave way to more flexibility and something was lost around the connectivity between people in those firms,” Beaudoin says.
Rest assured, lawyers are still able to do things that artificial intelligence cannot, like argue cases in front of a judge and negotiate deals on behalf of clients. While technology and recent industry trends have changed the dynamics of the legal services world, there will still be a demand for a “sentient” attorney in the courtroom and on the negotiating table. While law may not be the first industry to embrace the new way of doing business, it certainly won’t be the last.