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After 40 Years of Constant Change, What's Next for the Legal Industry?

Dan Packel LAW.COM

Predictions are dangerous business. Take the question of how big law firms can get. In 1999, Baker McKenzie, the largest firm in The American Lawyer’s Global 100, was home to nearly 2,500 lawyers. In 2009, it continued to employ more lawyers than any other firm in the world, nearly 4,000.

It would have been a fair bet to expect Baker McKenzie to maintain its position in 2019 with steady growth. How could anyone have scaled up quickly enough to displace the firm? And the firm did continue its upward trajectory, growing to 4,700 attorneys in the most recent survey.

Still, that bet would have been sunk by the emergence of a new megafirm, Dentons, whose rapid emergence demonstrates that predicting the terrain of the legal industry 10 years into the future is a fool’s errand.

“Change is happening with such rapidity on a far more exponential basis than it did a decade ago,” Dentons U.S. Chief Executive Mike McNamara says.

Part of the top brass in a 10,000-attorney firm that didn’t even exist 10 years ago, McNamara predicts the next three years will feature as much transformation as the previous 10.

Take this forecast, then, as a rough roadmap of what is likely to transpire in the legal industry, whether these changes take three years, five or even a full decade.

Technology and Upheaval

While it’s easy to conclude that the technological revolution that’s already been unleashed will continue to drive transformation over the next 10 years, it’s harder to pinpoint how.

Expect more and more tasks to become subject to automation—not just contracts and e-discovery but also areas like trademarks and due diligence for mergers, for starters.

Technology and artificial intelligence on their own are noteworthy, but what’s more compelling is the impact they will have on how firms are structured.

“Everything that can be taken out of the hands of subject-matter experts and handed over to the process experts and technologists will be,” says Orrick, Herrington & Sutcliffe Chairman and CEO Mitch Zuklie. “There will be far fewer associates sitting in rooms with documents and more strategic partnerships among law firms and legal tech providers.”

This transition could help chip away at the supremacy of the billable hour. As work becomes less time-consuming, the imperative of charging based on effort will dissipate. Furthermore, sharper analytical tools can provide a more accurate sense of what’s involved in a case and what a good outcome looks like, particularly for litigation.

“That helps you move away from billable hours and toward more of a flat fee,” says Stephen Embry, a litigator who publishes the blog TechLaw Crossroads.

Not only will technology move up the value chain for litigation, it will also emerge as a greater player on the deal side. Jae Um, director of pricing strategy at Baker McKenzie, expects to see a much greater focus on compliance and regulatory technology in the next five years.

As AI solutions, which depend upon machine learning, are slowly deployed in the marketplace, their efficacy will inevitably grow.

“As we see more companies develop tools with very special use cases and have to refine their solutions because of the products’ market fit, that’s going to accelerate the improvement of the tooling itself,” Um says.

The fallout from their adoption will prompt a reallocation of labor that should also upset law firms’ traditional model, which features an army of associates and a smaller cadre of partners at the top.

Long gone are the days of a client coming into a firm and handing off an entire piece of litigation to be parceled out among associates, including tasks unrelated to the practice of law. If the corporate legal department hasn’t already broken apart this work and sent off what it can to alternative providers, the law firm itself will be putting its vastly expanded technical team to work. Zuklie expects firms to reach a 60-40 split between lawyers and other professionals—compliance experts and business development staff along with technologists and process experts. One valuable side effect will be increased cognitive diversity. Individuals with more diverse training, when placed together, will come up with better answers.

“It’s a tried-and-true method of problem-solving in the business world,” says Cat Moon, director of innovation design for the Program in Law and Innovation at Vanderbilt Law School. “It simply must be the way that law goes.”

But what about those JD holders? If associates aren’t just fungible but expendable, the same isn’t the case for experienced subject-matter experts.

“You will need more gray-haired partners to truly exercise superior judgment,” says consultant Bruce MacEwen, founder of Adam Smith Esq.

The Human Side

The smaller cohorts of associates coming into firms will face a changed reality as well, as the likelihood of most lawyers remaining until their hair turns gray shrinks further. While a growing number of firms will abbreviate the path to partnership, the brass ring will become increasingly elusive, especially for equity partnership, which will require business acumen.

“The only commodity, unless you have really unique expertise, is an ability to generate income,” says Jeffrey Lowe, global practice leader of Major, Lindsey & Africa’s Law Firm Practice Group. “You can do that by billing hours, which is good, but the unicorns are the ones who have the ability to bill the hours and find the clients.”

As long as salaries remain high, Big Law will continue to be a desirable destination for the talented and ambitious.

“There are not a lot of other options out there, other than investment banking, that allow a younger person to make such money right out of the gate,” Lowe adds.

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