The future of any industry is always a hot topic, and so it is with the legal profession. A variety of experts sheltered at 1 Lombard Street from the summer rain to discuss this topic, in what proved to be a fiercely debated roundtable hosted by The Lawyer and sponsored by Travelers.
Round the table
Charlotte Baldwin, CDTO, Freshfields Bruckhaus Deringer
Sadie Baron, chief marketing officer, Reed Smith
Tamara Box, EME managing partner, Reed Smith
Oliver Brettle, partner, White & Case
Matt Byrne, The Lawyer
Jeremy Cohen, UK and Middle East CEO, Dentons
Sharon Glynn, Travelers
Catrin Griffiths, The Lawyer
Matthew Kellett, FSO UK law leader, EY Law
Axel Koelsch, COO, Addleshaw Goddard
Emily Lew, knowledge manager, Slaughter and May
Amar Mehta, The Lawyer
Julian Millar, Travelers
Frances Murphy, partner, Morgan Lewis & Bockius
Isabel Parker, chief legal innovation officer, Freshfields Bruckhaus Deringer
David Pollitt, managing partner, DAC Beachcroft
Paul Smith, Travelers
Tara Waters, partner and CEO of Ashurst Digital Ventures
Turkeys voting for Christmas
Being open to change is not something that tends to be on partners’ minds, the delegates agreed. Many continue to be remunerated extraordinarily well, so why would they lead modernisation at their respective firms? This is one of the reasons why the legal services sector has been so slow to change.
Similarly, career paths continue to be linear. Being a partner often remains the be-all and end-all for many lawyers, a view that has been conditioned into young minds but shouldn’t be, said one delegate. The legal sector has been resistant to change, but this is now coming to a head, with firms having to adapt to suit the needs of their clients or risk losing them.
Clients want their work delivered more cost-effectively and are asking firms to reduce rates. This means firms must change their delivery mechanisms. On the other hand, firms must continue to pay well or their top talent will leave. This has an impact on firms’ ability to make investments in areas such as AI and innovation.
This started a lively discussion on client choice, with most delegates agreeing that the growth of in-house legal teams and the Big Four accountants posed a threat to traditional firms.
One delegate said that there was a risk that traditional firms will have business taken away from them, highlighting HSBC’s 1,500-strong legal team as an example of the sheer scale that is out there these days.
The discussion did not paint a completely bleak picture for firms, but there is a clear understanding that there is a need for change, delegates agreed. For many, this should be seen more as an opportunity than a threat.
Bluntly, firms need to cut out the hot air and focus on what clients want. One delegate suggested that if we were to fast-forward 20 years, there will be firms using more technology to provide a cheaper service while the 10 per cent of people currently making vast amounts of money will have disappeared.
Delegates were in agreement when questioned about the need for change, although one lawyer noted that the US, which generates 48 per cent of the global legal market spend, was notably behind the UK in certain aspects.
The lawyer claimed the firm model and fee structures were effectively the same now as they were 20 years ago. There was no urgency to change, says the partner, because the market is so large and firms are still making so much money, a barrier to change.
Similarly, another delegate noted that some US firms were “panicking” because the quality of candidates had fallen off a cliff. For many young people, the law is boring, slow to change and the work is often dreary and linear, argued this lawyer.
“Millennials aren’t interested in doing this for 15 years, on the off chance of making partner,” claimed the lawyer.
“They aren’t interested in sharing a room with one person and working in a non-collaborative manner.”
There has been some change, with firms trialling different types of office environment. However, partners overall still need convincing that change is necessary.
With a sense of caution in his voice, one delegate warned that the presumption that change will necessarily bring with it new blood is flawed.
Millennials either leave, growing frustrated at the pace of change, or follow the status quo and accept the norm, warned another delegate.
External pressures and change
All delegates acknowledged the importance of technological advances in bringing about change. They agreed that much of the change is being led by the Big Four accountants and tech start-ups as well as several of the larger in-house legal teams. Indeed, while investment in in-house has historically tended to be low on a company’s priorities list, these days, some legal departments are receiving extra attention, leading to accelerated change.
One delegate noted that in-house teams are constantly evolving and growing and while they might not be moving at the speed of tech companies, they are evolving faster than some law firms. Other clients are noting the multi-disciplinary services now being offered to them by the Big Four and are demanding this holistic service from the law firms they use.
Technology, particularly AI, is becoming increasingly important, but is now the only key to modernisation, according to delegates.
There is now a range of business models firms can adopt, including consultancy, litigation funding, external investment and IPOs, all of which are enabling firms to evolve.
But while the external pressures are driving some change, if firms really want to modernise, disruption must come from within. The priorities for change in the next 12 months should focus on diversifying the services firms offer, which would help them retain talent and collaborate more with clients.
There was wider agreement among the panel that firms should also future-proof their businesses by creating the foundations to be flexible and agile. A move to the cloud would offer more security and scalability, leading to digital transformation. Bringing an integrated view across the business with a focus on data would mean that firms can keep pace with other industries.
One lawyer noted that a shift in the firm business model could happen, with the hourglass model taking over from the pyramid as the new normal as aspects of the latter continue to break down. Technology and automation have disrupted and, in some instances, replaced work that was previously done manually.
What was once a cash cow for firms – using associates on repetitive tasks and billing thousands of hours for this – is no longer a viable model. Clients are refusing to pay and are taking this work normally done by those at the base of the pyramid to alternative service providers.
This inevitably has a significant impact on the roles and responsibilities of people firms employ. New roles are emerging and taking their place in the new hourglass model.
Delegates agreed that firms should not be afraid when their model evolves but should be well aware of those who seek change it radically. There is a burning platform that will drive change, and while the pace of change may be frustrating, firms can take a leaf out of the tech companies’ books.
These start-ups are changing and adapting every day. Change at firms comes much more slowly, perhaps on a monthly or annual basis. This is simply too slow for the world as it is now.
Travelers: why we chose to discuss the future of firms
“When we were asked to propose a topic for the roundtable, the future of law firms seemed to be the natural choice as it is a subject that comes up frequently in our discussions with firms.
The lively debate that ensued on the morning validated our decision.
It feels as though firms are fighting a battle on all fronts. Internally, firms are, on the one hand, recognising the need for change; while on the other hand, those profiting from the status quo have an understandable lack of desire to initiate the changes necessary to future-proof them against the external challenges from the likes of the Big Four.
It is a time of flux and uncertainty with many firms at a crossroads. While some are gearing up for the fight and starting to take the lead on innovation, others are left behind.
The roundtable was a great opportunity to bring together a diverse and lively group of participants willing to talk openly about the challenges they are seeing in their own firms as well as the industry at large, and it was a privilege to be a part of those discussions.”