MidLaw never sleeps

Dr. George Beaton has spoken again to the future of the legal services delivery business. This time in an interview with Forbes.HiRes

In the future, the business of legal services delivery will be competitive, volatile and pressed to the margins for all but a few firms. This is happening for reasons that are well known:

  • technology is delivering new ways to provide services and displacing traditional methods and processes,
  • alternative services providers (alternatives to lawyers and firms) are delivering legal services that once required lawyers,
  • newly resourced and empowered in-house legal departments are both displacing outside law firms, and demanding that law firms develop alternatives to traditional ways,
  • law firms themselves are morphing away from full-service business models into a wide array of new forms and competitors,
  • the significance of geographic boundaries is changing, generally waning,
  • capabilities for networking are continuing to develop and evolve.

Successful firms of the future must be focused on their strengths, intent on managing expenses, and willing to spend money to build new practices as opportunities appear. Firms must stand apart and be recognized for the things that they do really well.

Neither lawyers nor law firms are well suited for this.

  • Partnerships are slow to make decisions.
  • Partnerships lack balance sheets suited to taking risks (spending money to make money).
  • Established law partnerships are biased in favor of older, well established lawyers, whose orientation to the future is naturally defensive and change-averse.
  • Lawyers are perfectionists, trained (ultimately, cultured) to take pains to identify and eliminate risk.
  • Law firms encompass incompatible practices, seeking to manage both routine process work, and also one-of-kind advisory and advocacy services, within the same culture.

In these times, when market demand for legal services will rise and fall, and within a broad secular trend toward alternative providers and new methods of competing for business, mid-size firms must strike difficult balances.

  • Right sizing. Mid-size firms must attract and retain excellent professionals, and field a roster that is broad enough and deep enough to cover strategically appropriate work, but they dare not be overstaffed. Partly, this is about having the professionals needed to do the work; partly it is about assuring clients of the firm’s capabilities. BUT in volatile times, no firm can afford to be overstaffed, or overstaffed in narrow specialties, or over-committed to the wrong practice areas.
  • Investment in new resources. Mid-size firms can rarely lead in the development of major new technologies and innovations. Neither can they cannot afford to be far behind.
  • Expense management. Beaton says that  “the traditional, so-called full-service, middle tier firm that is striving to offer better value, based on lower rates and lower overhead,”  is chasing a value proposition that is illusory. “There will be no room for profitable generalists . . .  no room at all.” Keeping costs low is critical, but succeeding in the new marketplace cannot be accomplished simply by spending and charging less.
  • Strategic growth. For mid-size firms, growth is a conundrum. Don’t grow away from what makes you good. Aimless growth, particularly growth born of defensive merging, passes beyond conundrum into disaster. Beaton says, “There will come a point when these merged firms realize that bigger isn’t necessarily better for clients, and doesn’t create more value for anybody. They’re just more difficult to manage, and the clients don’t necessarily get a better deal. And then, after that, you’ll get fragmentation.”
  • Focus. If aimless growth threatens fragmentation, what is the alternative? Beaton: “We see a component of kaleidoscope in what we call ‘back to the cottage’ — specialist, small cottage industry firms, that are really, really good at something.”
  • Culture. Law partnerships must be managed for efficiency as never before, but this must be balanced with the traditional strengths of professional partnerships: shared values, personal ties among members and a sense of purpose — in two words, professionalism and collegiality.

Attract the right number of excellent people. Always be finding and pursuing opportunities. Control growth and expenses. Only do those things that you can be really good at. And, work at partnership.

Midlaw never sleeps.

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