Some years back I was speaking with a senior leader in a small, local Romanian consulting practice about the state of the Romanian business world. She said that just a few years previous, Romanian businesses only contacted a lawyer if they planned to sue somebody, but now lawyers and were being integrated into their strategy planning and core business discussions. She saw this as an evolution towards greater professionalism. It was progress.
So it’s odd in the US how law firms are regulated, limiting who may provide legal services and who may own and operate a law firm. These regulations have preserved antiquated business models in law firms, including a reliance on billable hours rather than pricing and charging according to the value lawyers add for their clients. Billable hours also make less sense as law firms and increasingly in-house counsel are reaching to third parties for help with data and technology, research, project management and key legal functions such as the discovery process or expert witness testimony.
Why is this important?
Because corporations across industries and public sector clients both are undergoing a slow transformation towards better risk management, greater transparency and reporting, more efficient finance management and capital raising, and in general improving GRC functions. These aren’t nice-to-do items or a fad, these are how competitive organizations survive in the 21st century market environment.
These changes require increasingly that consultants, lawyers, investment bankers, technologists and other professionals work closely together. Consulting firms themselves have been pressured in the years since 2009 to learn how to deliver integrated services across their business lines, and have been going to market organized around client problems rather than their own product line channels. And these firms have also been increasingly developing non-consulting service areas in-house such as investment banks, data centers, legal services, marketing and communications strategy services, economic research centers, etc., to support what used to be much simpler consulting projects. What used to be distinctly separate domains are now being pulled into a common service ecosystem, and this is being driven by client need.
In Europe, where the regulatory dynamics are different, consulting firms are able to compete more directly with law firms, and legal clients are able to handle more of the legal sides of their needs through their own general counsel. Even here in the US, clients are trying to use general counsel for more than traditionally has been the case, though again – they face regulatory constraints.
It’s time for lawyers to be freed from the obsolete shackles of the quaint, 1950s-style law firm, with its almost feudal partner model. It’s time for lawyers to be able to work alongside other key professionals to deliver the solutions modern institutional clients need, and to be compensated in a way that incentivizes value creation for clients rather than simply hitting them with a questionable T&M bill. It’s time for a major deregulation of the legal industry, very akin to what the transportation and airline industry experienced in the US in 1978.