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Traditional Law is Broken (Part 1)

5 minutes • 14 Jul 16

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The traditional law firm model (“TradLaw”) as we know it is broken; but fortunately, a new dawn is upon the legal industry and its best days are unquestionably still ahead.

In this four-part series, Global Legal Solutions (“GLS”) unpacks the demise of so called ‘TradLaw’ and the rise of alternative solutions for disillusioned lawyers and dissatisfied clients.

In this first article we explain what “TradLaw” is and identify the forces of change that are reshaping the legal industry – taking it into a better place, one where business can actually access it. 

TradLaw does not like change.  Given that there are still a few more years of higher profits within easy “redundancy” driven reach, many players will continue to resist the inevitable.

Nevertheless, the TradLaw model is in a serial state of decay - business cannot access it.        

TradLaw - having their cake and eating it

TradLaw is the classic owner/partner law firm model built upon hourly rate architecture.  Time is the unit of trade, and how much time is sold is the essential management/performance/productivity KPI.   

The model focuses on short-term profit maximisation whilst remaining wedded to a wide variety of inherently inefficient operating practices that actually prevent optimised service delivery.

We call this the “Have Cake & Eat” model – and oh how much cake has been eaten over the years!

For over a century, the Have Cake & Eat model has made TradLaw partners rich.  The resulting costs of legal services, however, have now finally proven too much for most businesses globally. 

The inarguable reality is that even the biggest businesses globally are unable to afford access to quality legal support, either at all or in the quantities they would like.  Or is your business different?

Who are the culprits?

Unfortunately, the Have Cake & Eat model is prevalent across much of the legal industry – most firms are heavily influenced by hourly rate architecture and its associated decision making.

Just how ill-suited this model is for the future is demonstrated by the incredibly short life cycle of Big Law - the legal industry’s response to globalisation – a phenomenon that should actually bring prices down!

Big Law was set up to provide what smaller law firms could not - heavy lift, ‘full-service’ and diverse legal capabilities, increasingly across borders.  It is now the most expensive form of TradLaw.

At its peak, Big Law was only ever accessible to a fraction of the overall MNC business community - principally the investment banks and Fortune 500 type companies.

Despite the appeal of a globalised legal ‘one-stop-shop’, even the biggest global corporates cannot justify the cost, and many have abandoned Big Law for more cost effective alternatives.

The same backlash is faced by most TradLaw operators, whether big or small.  The brutal truth is that the global business community considers TradLaw (and especially Big Law) to be cost inaccessible.  

Access to knowledge has always levelled the playing field and every law firm has an internet connection.  In the case of Big Law, geographic coverage alone cannot and does not justify the fees that Big Law charge.

"The party is well and truly over!"

 

A delicious irony - famine where there ought to be feast

There is a delicious irony in that TradLaw’s model is rapidly approaching the end of its shelf life at a time when global demand for legal support is at an all-time high. 

"Irrespective of the global financial crisis (the “GFC”), the global economy needs its lawyers now more than ever."  

 

Businesses worldwide are choking on increased regulation – it is getting harder (not easier) for businesses to do business, especially across borders.

Yet, paradoxically, supply and demand (being the vast, pent up pool of latent demand that exists globally) is not connecting efficiently via the TradLaw construct.

The problem is not what TradLaw is offering, but how it is being offered.

The legal industry must find a new way of connecting supply and demand and TradLaw is not the answer.  Fortunately, new ways are emerging, and organisations like GLS are leading the way.

Take just 90 seconds to see how we are making world-class legal support available on a global basis at not more than 20% of the cost of comparable world class providers. Click here to view video.

The omens of demise

Despite intensifying dissatisfaction with the current TradLaw model amongst clients and practitioners alike, the omens of impending demise are being ignored by most TradLaw operators. 

Sadly, nowhere is the proverbial ostrich's head buried more deeply in the sand than in the case of our old friend ‘Big Law’. 

Much of TradLaw (especially Big Law) is so heavily burdened by its own structural, cultural and economic inefficiencies that its ability to affect a corrective pivot to where clients need it is limited.

A century of the Have Cake & Eat model reliably delivering super profits has given many TradLaw operators a false sense of confidence, especially when PEP can still be easily increased.

Flat lined markets continue to be dismissed by many as being “GFC down” aggravated by a “cyclical temporary oversupply of lawyers” to be corrected by rounds of redundancies and early partner exits.

And a new phenomenon has emerged - excess capacity within Big Law’s ranks is now being bundled into the so-called premium brand, low cost offering.  Slightly cheaper units of time are now available.

Is this enlightened management, market insight or simply redundancy without the charge?  To us it sounds like Big Law being Big Law – people being sacrificed at the altar of profit.

Dividing 10 by 3 instead of 5 to keep the PEP on the rise can only go on for so long.  Self-cannibalisation in the absence of the desire or ability to affect a strategic structural response is not sustainable.

Change within TradLaw can only come from the top but its leaders are typically in their sunset years; taking a PEP hit “for the team” in order to effect the necessary structural change is hardly likely.  

How do you think that “home-front” conversation will play out? “Honey I shrunk the pay-cheque, but the next generation are going to be in better shape”.  Let’s revisit the headcount shall we!

Our profession deserves more than this.

"Darwinian evolutionary theory has not granted the legal industry an exemption, it has just been a bit slow to arrive."

So what next?

As any good story requires, even in our forlorn industry, hope springs eternal; Darwinian evolutionary theory has not granted the legal industry an exemption, it has just been a bit slow to arrive.

Our industry is becoming far more accessible.  GLS, and others like us, are utilising new business models to remove time and cost as barriers to businesses needing the highest quality legal support.

As an industry, our best years are ahead.  It has never been a better time to be a lawyer - not only is there a lot of work available to be done, the work we must do is important.

Years of quantitative easing/fiscal stimulus has done little to lift the GFC cloud – only businesses doing business can do that – and we (the lawyers) must be accessible to make that happen.

In our next article we will identify the inefficiencies that Big Law could easily eradicate and bring legal costs down by 80%.  That is what we have achieved at GLS.  

We are 20% of the cost of Big Law – yet offer our clients access to the same quality of lawyers in the same markets.  In fact, most of our lawyers have joined us from Big Law. Whilst Big Law is firing, GLS is hiring globally.

In subsequent articles we will show how separation from the billable hour and reconciliation with disengaged employees is the key to the modernisation of the legal industry.  

Finally, we at GLS categorically dismiss Big Law’s claims of there being an over-supply of lawyers -  the only thing in over-supply is over-priced and cost inaccessible lawyers! 

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