Innovation and Law Firms

Here is a great article from the Financial Times that discusses some of the reasons why the legal profession and law firms have been slow to adopt innovative changes to their business models. Among the takeaways, two stand out for me.

First, it will be difficult to tell lawyers at big law firms to change the traditional law firm model given that it has been so profitable for partners at firms. Richard Susskind was quoted in this article, and he clearly frames the problem that traditional law firms present to innovation: “It is hard to tell a room full of millionaires that they might have their business model wrong.”

Second, the traditional model has fostered a cycle that is difficult to disrupt as the traditional law firm model has been adopted by many as “business as usual.” The normal course of business in these firms is to pay out profits to partners, rather than using capital for innovation and firm development. The article points out that “[t]he glue that binds these law firms together is partner remuneration, which — as the profession’s most popular measure of success and retention — has to rise every year. The leaders of these firms, more often than not, feel they must pay out the profits of the firm annually to the partners rather than invest in research and development.” A model that pressures firm leaders to continue business in the traditional sense will struggle in incorporating innovative ideas.

The article provides some hope that innovation and change, albeit slow-moving, is on the horizon in the law. Corporate counsel are coming up with more creative solutions to their legal challenges, seeking less expensive alternatives to traditional law firms. The Corporate Legal Operations Consortium (Cloc) is also inspiring as it brings together legal operations managers from large corporate settings to share best practices and ideas. Cloc may very well be one of the stronger examples of design thinking in legal services. However, so long as the notion persists that ‘no one ever got in trouble with their supervisor for engaging a white shoe law firm,’ innovation will continue to be an uphill battle.

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