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The lawyer vs. the law firm

"Clients hire lawyers, not firms,” is the oldest line in the business development handbook.

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"Clients hire lawyers, not firms,” is the oldest line in the business development handbook. Law has long been a personal services business with a strong relationship component: clients come to rely not only on a lawyer’s expertise, but also on his or her judgment and advice. By contrast, the law firm is equally far away from the client, normally present as just a name on a letterhead or an invoice. Most of a law firm’s clients deal primarily, if not exclusively, with one lawyer or small group of lawyers and staff.

Lawyers have sufficient confidence in this dynamic that they exercise an extraordinary degree of autonomy within their firms. Ask a typical law firm partner to vote on a proposal that will compromise revenue in the short-term but enhance profits in the long term: in most cases, the thumb predictably will be turned down. The brand of the individual lawyer has consistently trumped the shingle of the firm under which he or she happens to practice at the moment.

This is the war that’s been raging within law firms for years now: the fight for control of the business between individual lawyers and the collective firm. Firms have lost so many of these battles that they’ve stopped counting and, in many cases, have stopped fighting. When the firm is nothing more than the sum of its individual, autonomous owner/worker lawyers, what chance does the firm have to escape the immense gravitational pull of those lawyers’ self-interest?

"Clients hire lawyers, not firms,” is the oldest line in the business development handbook.

That’s why the coming, inevitable decline in law firms’ lawyer population is of such immense importance to law firm strategy.

Over the next several years, a growing share of law firms’ revenue will come from sources other than its lawyers, including automated systems and paraprofessionals. A growing amount of their business will arise from firm-focused sales campaigns rather than from the outreach efforts of individual lawyers. And every time a law firm successfully invests in a source of productivity other then a lawyer (and especially other than an equity partner), the firm gains leverage over its lawyers and its lawyers lose ground.

This might be part of the reason (beyond the standard causes of short-term thinking, risk aversion, and plain stinginess) that many lawyers reflexively resist investments that allow their firm to deliver services without the active involvement, and outside the personal control, of its lawyers. With each step towards process improvement, pricing controls, project management, and similar initiatives, law firms are creating reasons for clients to buy their services with minimal regard to which lawyer (if indeed, any lawyer) is providing the service.

Clients have hired lawyers rather than firms for many reasons, but the most important reason is that there was never much of a “firm” to hire: the firms had little to offer beyond access to a lawyer whose law practice they were hosting. But now, after many years of frustrating impotence, law firms can finally start to serve their markets institutionally.

Law firms, in short, are going to become commercial enterprises as well as professional service shops.

Law firms will no longer be held back by their lawyers, unable to muster enough collective gravity and momentum to make critical strategic decisions. They will become more streamlined, systematized, managed, automated, and centralized, not just to compete in a more demanding market, but to settle once and for all the question of who’s really calling the shots around here.

Law firms, in short, are going to become commercial enterprises as well as professional service shops. They will find ways to separate ownership from management and management from labour. They will institute business processes and leverage technology as a matter of course. They will still rely upon good lawyers to deliver great service; but they will no longer allow those lawyers to dictate the firm’s strategy and direction.

Firms that recognize and catch this trend will begin to change what they are, what they do, and how they do it. And the legal market will be transformed in the process.