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Vol. 37, No. 6

What the future legal market means for lawyers and bar associations

Ten years ago, the American legal profession was nearing the top of a cresting wave of profit and progress. The number of law office jobs was verging on a high-water mark of 1,123,000; 100,000 prospective students were filling out applications to law school; large law firms were on their way to offering $160,000 starting salaries. Firms reported record profits, the economy was bubbling over, and life was good.

What a difference a decade makes. The legal market has lost 54,000 jobs since 2004, while law school applications have dropped 50 percent since then; fewer than half of last year’s graduates have found full-time law-related work. Firm partner profits are dropping fast. Lawyers are seeing clients demand lower fees, switch to other providers, or go out of business altogether.

How did all this happen? Of course, the housing bubble, financial crisis, and recession all took their toll—but there are other factors, too. Consider: Back in 2003,

  • Nobody received news or found information on smartphones or iPads. 
  • LinkedIn had just launched, and there was no Facebook or Twitter.
  • Thomas Friedman was two years away from writing The World Is Flat.
  • Pangea3, today the world’s largest legal process outsourcer, didn’t exist.
  • Computer programs that could replicate lawyer work weren’t even in development.
  • Banks and realty companies weren’t actively avoiding hiring lawyers.
  • Millions of Americans with legal needs weren’t representing themselves in court.

Three big factors

Globalization, technology, and regulatory change have combined with economic upheaval to transform the legal world.

1. Globalization: Transatlantic mergers have resulted in gigantic, 4,000-lawyer firms. Legal work flies across borders and over oceans via the internet. Outsourcing legal work to common-law countries is now routine for some large commercial clients and a growing number of law firms. India has 1 million lawyers. China plans to open 500 law schools. A law firm’s world is no longer limited to just the county or city where the office is located.

2. Technology: It’s more than just clients insisting on immediate service and 24/7 accessibility, or the internet enabling clients to access legal knowledge, and nonlawyers to deliver basic legal products online. Technology has also created programs that can take on lawyer tasks: automated contract creation engines, expert applications that answer regulatory and compliance questions, and online dispute resolution systems.

3. Regulation: England and Wales allow multidisciplinary practices and nonlawyer investment in and ownership of law firms. Australia has two publicly traded law firms and imposes discipline on law firms, not just on individual attorneys. Europe and Canada have changed their rules to allow increased mobility of lawyers among jurisdictions.

Clients balking at costs

Perhaps the most significant factor driving all these market changes, however, is the gap between what lawyers charge for their services and what people feel they can or want to spend on legal matters. Too many clients, both consumer and corporate, believe that attorneys drive up the cost of legal transactions without adding commensurate value. Now we have new competition that’s faster and cheaper than us, and they’re working hard on being as good as we are, or better.

As a result, lawyers are now wrestling with a fundamental question: How will my profession and my practice change as a result of the transformation of the legal market? Every attorney, from the first-year associate to the veteran solo to the partner of a worldwide law firm, is trying to figure out a business plan that will respond to a rapidly changing legal environment—armed with ethical and professional platforms that date from the Industrial Revolution.

New roles for bar associations

How can lawyers answer that fundamental question regarding change? And how can bar associations make themselves indispensable to lawyers in this effort? Here are our suggestions:

1. Streamline lawyers’ practices. Many law offices, especially solos and small practices, are low-tech, high-effort, and inefficient, resulting in higher costs of operation than necessary. Today, however, virtual firms, cloud-based software, online legal resources, social media marketing, virtual assistants, and other advances can vastly reduce the costs of a law practice. In order to price competitively and still turn a profit, lawyers must lower their cost of doing business.

Bar associations can help by: offering CLEs on process improvement and technology use, providing discounted rates for cost-lowering suppliers, and helping lawyers improve their web presence.

2. Leverage commoditized work. For many smaller firms, legal work such as leases, wills, incorporations, and real estate transactions are the backbone of their business. But it’s exactly these areas that are being infiltrated by low-priced suppliers such as LegalZoom and Rocket Lawyer. Lawyers’ best bet is to accept that the production of legal documents is becoming commoditized, and use it to their advantage. Attorneys can gear their practices to offer higher-value legal services associated with the commoditized legal product. Make the will available online, but build relationships around estate planning and tax structuring; offer the incorporation for free, but build relationships around regulatory advice and strategic counsel.

Bar associations can help by: producing high-quality, bar-certified forms and documents and offering them to members free of charge, and by offering CLEs about how to move up clients’ value chain.

3. Price services rationally. Very soon, lawyers will be only one type of participant in a wide-open, highly competitive legal market—and they will be the only ones who routinely tell clients that they can’t provide a fixed price for their product or service. Attorneys’ reliance on billable hours and acceptance of unpredictable prices will be fatal in a market that demands predictability; equally fatal, however, will be offering flat fees without any notion of whether those fees will be profitable. Lawyers will have to embrace not just “alternative” fee arrangements, but a sensible, value-based approach to pricing their services.

Bar associations can help by: publishing ideas about ways to price legal services that focus on client value, competitive intelligence, and cost control, and by certifying CLEs that help train lawyers to be effective pricers.

Staying relevant

It’s impossible to predict the future, but there’s no doubt that the pace of change is not going to stand still, waiting for lawyers to catch up. The profession should avoid the temptation to attack new providers: These new market entrants are here because lawyers have failed to address the accessibility gap with clients.

Attorneys who take steps such as those outlined above will go a long way toward both making their own firms more competitive and upscaling their services for a future market in which all but the most strategic, complex, and trusted work can be done by nonlawyers. Bar associations that help lawyers in this effort will find themselves not just relevant to their members, but also, and ever-increasingly, indispensable partners to a transforming legal profession.

Note: The changing legal profession and the role of the bar association will also be the subject of the National Conference of Bar Presidents’ plenary at the 2013 Annual Meeting in San Francisco this August.