The business model of large law firms needs to change, but no one can agree on how to change or even if we can. That’s the takeaway of a recent poll by business-of-law blog Adam Smith Esq., which found that of the nearly 150 respondents, well over half agreed that law firms need to reexamine the fundamental premise of the law firm partnership model.
“The legal recession has lasted so long that some observers are beginning to question the fundamental business model of Big Law,” said Lee Pacchia of Bloomberg Law, who discussed the findings with Bruce MacEwen, publisher of the blog, in a video chat sponsored by ABA Journal.
“I would say the biggest news coming out of [the poll], the biggest surprise to me, was how there’s a strong consensus that things need to change and there is no consensus on whether law firms can change,” MacEwen said. “Well more than half of these people who are in these large law firm partnerships were saying our model cannot invest to keep going in the future, and we need to question the whole structure.”
When asked if, as partnerships, firms “won’t invest—or invest enough—in new ways of doing business or delivering service,” 56 percent agreed that they aren’t and that the partnership business model needs to be reexamined. Yet 32 percent said firm investment doesn’t matter; firms can create “‘retained earnings’ and investment capital in a law firm partnership.”
The poll followed up by asking if firms need outside investment to innovate. And while 43 percent said firms can do it on their own, MacEwen isn’t convinced. “My view is,” he said. “Show me; prove to me that we can innovate on our own.”
The poll also asked readers if they believe technology and legal process outsourcing (LPO) companies are taking work from traditional firms, the results:
- 48 percent agree that LPOs are taking business away and that it is “really beginning to hurt” their business
- 46 percent believe LPOs are taking away business, but on an insubstantial scale.
- 6 percent disagree that LPOs are taking business, but do believe they eventually will.
- Only 1 percent believe that LPOs are not and will not take business away in the future.
When asked about whether Big Law will be able to fight back and how:
- 42 percent said law firms will fight back through honing their conventional model
- 30 percent believe law firms can only fight back by creating their own captive LPOs
- 27 percent think that law firms have no credible or effective defense in the long run
MacEwen discusses these and other findings on Adam Smith Esq., which you can read here. The post also includes the video chat with Pacchia.