For the past 20 years, law firms have been seeking creative ways to expand their services and become one-stop service providers for their clients.
By offering more services, firms can deepen and strengthen their client relationships and truly become an extension of their clients' teams while generating new revenue streams.
At first, the expansion into complementary services began with document review harvesting, processing and storage services to accompany the actual document reviews being done by the lawyers. Other firms expanded into crisis management services to better support their clients faced with high stakes litigation and investigations.
Now, some law firms are diving into new and innovative areas, including behavioral science and analytics advisory services. Others are expanding and growing existing consulting and management consulting offerings.
For example, last year, Ropes & Gray LLP launched R&G Insights Lab, a legal consulting practice that provides a global, integrated and cross-industry advisory services by combining the firm's legal team with specialized expertise in analytics, behavioral science and strategic consulting.
Similarly, last summer, Paul Hastings LLP announced the hiring of former Deloitte life sciences consultant BJ D'Avella to lead its newly formed Life Sciences Consulting Group, which collaborates with the firm's attorneys to provide a one-stop shop for life sciences clients.
This year, Dentons launched Dentons Global Advisors with Albridge Stonebridge Group, a consulting firm led by former Secretary of State Madeleine Albright. The new firm provides nonlegal strategic counseling and support for clients in a variety of areas, including capital markets and transactions as well as reputational, regulatory and governance issues, such as commercial diplomacy, crisis management and geopolitical risk advice.
This adds to Denton's well-established foray into consulting services, which already included Nextlaw Labs and Nextlaw Ventures — two Dentons-affiliated entities that provide legal technology solutions to its clients — and NextLaw In-House Solutions, which advises corporate legal and law departments on optimizing their delivery of legal services through a team of former general counsel, senior in-house lawyers, and legal operations and technology professionals who serve as consultants.
Benefits of Venturing Into Consulting Services
Firms that venture into providing consulting services can reap many tangible and intangible benefits including the following.
Strengthening Existing Client Relationships
Law firms can increase client engagement and collaboration when they offer consulting services beyond the standard legal services.
Whether that's due diligence reviews used to advise clients on corporate transactions or using data and other analytics in connection with internal investigations and developing risk mitigation strategies, firms that provide complementary nonlegal services create a more seamless client services experience that potentially reduces inefficiencies and helps clients meet their goals faster.
Developing New Client Relationships
While at first the consulting arms of law firms will have most of their work coming from their affiliated or parent law firm, as these consulting service providers expand and develop independent reputations, new clients will discover the capabilities of the consulting arms, creating business development opportunities for the law firms.
Generating New Revenue Streams
Law firms often partner with independent alternate legal services providers, or ALSPs, and Big Four consulting firms to serve their clients, losing significant potential revenue.
ALSPs generated approximately $13.9 billion in revenue in 2019, with independent ALSPs dominating the market by generating approximately $12 million in revenue and law firms coming in a distant third generating an estimated $480 million.
By establishing their own consulting services, law firms can keep that revenue within the firm.
Risks in Offering Consulting Services
While there are significant upsides for law firms establishing consulting services, these firms are venturing into new territory and need to consider the risks.
Law firms are generally experienced at hiring lawyers, paralegals and administrative support staff. However, establishing consulting services requires expertise that is outside traditional law firm hiring which can present significant challenges, particularly when there are more established firms with proven track records providing similar services.
Law firms should hire seasoned candidates who have experience working with law firms and lawyers on complex matters. Additionally, potential candidates should have experience building and leading teams.
Top law firms have well-established reputations for providing excellent legal services. A law firm that ventures into consulting services puts their name brand at risk.
As Warren Buffett once said, "[I]t takes 20 years to build a reputation and five minutes to ruin it." Law firms that provide consulting services have to do so at the same caliber they provide legal services. Bringing on experienced talent to lead and sell the consulting services will help with reputation management.
Also, involving new employees in the training that lawyers receive at the firm, such as internal continuing legal education opportunities, and immersing them in the firm culture will help them understand the overall reputation and values of the firm.
Many law firms are stretching their creative muscles into new service areas.
By providing innovative and complementary solutions, law firms can address their clients' needs more effectively, provide more holistic solutions, strengthen existing and develop new client relationships and generate additional revenue streams.
Additionally, these consulting offerings provide new opportunities for subject-matter experts to join law firms and offer support outside of traditional legal services.
While there are some associated risks, the potential rewards may make taking those risks worth it.