Change is difficult for all organisations, but it’s especially hard for law firms. Why? It’s asking them to go against their training and the way they practice. Lawyers are trained to identify the rules and have their clients work within those rules. To hunt down a precedent and make sure you fall within it. If no rule or precedent exists, then stop. So if change happens, it’s usually incremental, building in a slow and careful way from what’s been done before. That’s the modus operandi of a lawyer.
And why would you change, when what you’ve done before has worked a treat? The well-trodden path for law firms has been a very lucrative one.
Most important though, is the very nature of the partnership structure. When you have a business model in which all the profits are paid out every year, there’s little incentive for long term or risky investment. Senior partners just need it to be successful for a little longer. Junior partners are anxious to get a share of what they’ve worked towards for so long. Spending your take home pay today on change that, if successful, may only deliver rewards after you’re gone, is less than attractive.
Compare that to the corporate model, which reinvests profits now for long term success, and allows those responsible (the executive team) to share in that success with shares in the company, rather than paying out all profits today.
But if that’s difficult for law firms to compete with, it gets worse. Unlike the corporate model, Private Equity doesn’t need to wait for profits to be generated for reinvesting. They are investing hundreds of millions of dollars up front to disrupt law firms. Think Axiom, Arvo, Rocket Lawyer and LegalZoom, to name only a few. That’s all on top of the NewLaw offerings biting at their ankles. Ouch.
This makes the law firm shackles of the past are irrelevant. Technology, the economy, the market and especially clients, are saying it’s time for law firms to change.
It may be uncomfortable, but it’s necessary. And it creates opportunity.