The nature of the law firm – it’s about the client

pellicansLawyers are going now for 10 years contemplating The End of Lawyers? and how legal services organizations might be configured in the future. New taxonomies have emerged: Big Law, Mid Law, Alternative Services Providers, legal process managers, and more.

The thinking of economist Robert Coase has been rediscovered. Coase wrote The Nature of the Firm. Firms are needed, he said, only where performing functions within an enterprise costs less than outsourcing.

And so lawyers have taken Coase for guidance in how to build law firms. They ask themselves what advantages are won by taking functions in-house (specialty practices, IT, etc.) and what functions should be outsourced. “Full service law firms” are a challenged model. Is it better to be a one-stop organization, possibly with multiple offices; or a niche-oriented, highly networked shop?

But, wait.  Are law firms asking the right question?

The driving question is not so much how law firms should be configured. It is how will clients configure themselves? Can businesses obtain legal services better in-house or outside? If they go outside, are they better served by law firms or alternatives?

For law firms, the truly strategic question is not whether they need an ERISA capability, or a healthcare practice. It is what services will clients do for themselves? And, when clients choose to go outside, what can a law firm do better and cheaper than alternative providers? These are questions that are answered quite differently, depending on the size, location and practice competencies of different law firms.

The concept that legal services are best delivered from a stand-alone professional services partnership – in order to assure independence, competence and objectivity – has modest appeal for clients who have concluded that they can obtain the same services more efficiently elsewhere.

What can traditional law firms do best by these measures?

It’s about the client’s economics, not the law firm’s.

Quentin_Massys_-_Portrait_of_a_Man_-_National_Gallery_of_Scotland

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