The New Leverage

Both for the reasons just suggested  (fewer hours, lower rates) and for other reasons as well (less work, too many lawyers, competition from non-lawyers) the traditional law firm consultants’ nostrum, “leverage”, is losing its punch and tanking the law firm “business model”.

What’s a law firm to do? One suggestion: “the new leverage.” Instead of leveraging associates, they say, leverage technology (especially, knowledge management); leverage non-lawyer staff.

Well, OK.  But in law firms what leveraging does is identify standardizable and replicable domains of work and push them down to a cheaper level, then take a profit – which is to say, that technology and paralegals can lever knowledge and process work, but not so much counseling or advocacy work. And knowledge and process are not at the core of what lawyers do.

Leverage is the juice of hierarchical, departmentalized firms – the ones that slice and dice legal work into separated tasks (document review, title searches, etc.) and hand them down. In the good old days of the Bubble, you’d get more work, hire more associates and raise the rates. That’s what I call a business model.

And it is a good business to be in as long as you have the work. In low-tech times that model may have been about the only way to achieve scale, manage complexity and spread expenses. But now, scalable work is headed to Asia, to networks and to computers.

If you can still sustain the leverage model: go for it. It is a socially desirable thing to do.

But that is not what lawyers are for. Lawyers are to solve problems in the context of change, ambiguity and uncertainty. They are to bring experience, creativity and judgment to parlous circumstances. They are to make connections and span the divides between adverse interests.

We are entering upon an era in which the leveraged-law-firm model can no longer be sustained (except in a few contexts). Scale is a commodity. Replicable work can be networked and outsourced and performed by machines.

Many fewer law firms will make their money by bringing size or scale to projects. Ultimately, almost none. You won’t need law firms for that anymore. Firms will foster and manage connections and networks and enable lawyers to do what lawyers do.

The core of what law firms are for, by the way, is to identify, develop and enable lawyers who can do the core lawyer work.

The new leverage is no leverage.

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