Law firms that fail to embrace “legal process management” will quickly lose out to new competitors, such as accounting firms, legal publishers and businesses fuelled by external investment, Professor Richard Susskind has warned.
The legal IT and strategy guru has also criticised the approach of many large firms to making cuts during the recession, saying that only a few have managed to do so “strategically, sensitively, and in a manner that will not affect long-term morale and brand”.
In a new introduction to the paperback edition of his book The End of Lawyers? – which looks at how the market has developed in the two years since he completed the manuscript for the hardback – he writes: “Those that have fired high-performing loyal staff because their areas of work have dried up will not for many years, if ever again, command undiluted loyalty among their junior people.
“In contrast, those firms where partners have made serious sacrifices to keep their staff in employment are those whose reputation is now high and will attract and retain the best talent in the future.”
He is also unconvinced by law firms’ efforts to offer alternatives to hourly billing, such as volume discounts, blended rates, fixed fees, and various forms of value billing. “Astute clients say, with justification, that when most firms present alternatives to hourly billing, the underlying modelling is still based on time spent, that firms are not inclined to bid in a way that will reduce their profitability, and so the proposals contain charging models that may superficially seem more palatable but do not substantially reduce the final bill. This, in my view, is a truth that is rarely articulated by commentators.”
Healthier firms recognise the need “to invest in new ways of undertaking their routine and repetitive legal work at much lower cost than today”, Professor Susskind continues, reaffirming the importance he attaches to legal process management. This involves “decomposing” a legal matter into its constituent tasks, and finding the most efficient and appropriate way to carry out each – what he calls “multi-sourcing”. He also reflects on how fast legal process outsourcing has developed over the past two years.
The consultant lays out four models for legal businesses in the future:
- “The Target”, which is broadly the structure of most larger law firms today, with an inner ring of what Professor Susskind calls “expert trusted advisers”, a middle ring of “enhanced practitioners” and an outer ring of routine workers.
- “The Doughnut”, the same as The Target minus the outer ring, with routine and repetitive work outsourced.
- “The Glazed Doughnut”, still with expert trusted advisers and enhanced practitioners, but with an additional ring (or glaze) around them of staff to handle legal process management.
- “The Cog”, which is The Glazed Doughnut with some routine work undertaken internally, for reasons such as confidentiality or because the firm can do it more efficiently than external providers.
Professor Susskind also outlines two techniques that law firm leaders should employ to help them meet their longer-term strategic challenges: “stress-testing”, in which each practice area should undergo a formal evaluation of how they will face the pressures the market will bring over the next three to six years; and “blank-sheet thinking”, where each partner in a practice area is asked to write down how they would design heir practice area from scratch. “Generally and surprisingly I tend to find a great deal of common thinking,” Professor Susskind writes.
- Over the next couple of days, Legal Futures will be publishing an interview with Professor Susskind following publication of his book.
- The End of Lawyers? is published by Oxford University Press. Click here.