The new normal in the legal industry is flat financial performance year to year, and firms aren’t doing enough about it.
That’s the accusation levied in 2016’s annual report on the state of the legal market from Georgetown University Law Center’s Center for the Study of the Legal Profession. One solution the report provides: Dismantle the power of the full partnership.
In an extended allegory, the report’s authors write about how photography company Kodak experimented with digital photo screens but eventually ceded the photo market it had cornered with film sales to more technologically adept camera makers.
“Kodak essentially chose to ignore the fundamental shift in its market—until it was too late,” the report says. In the legal industry, “what once was a seller’s market has now clearly become a buyer’s market, and the ramifications of that change are significant.”
The Georgetown Law group notes that law firms have tried to budget better for clients and tacked on services like alternative fee arrangements and the outsourcing of electronic discovery. But law firms haven’t been proactive enough in adapting to technology, modern accounting practices and in ways to govern their organizations. For instance, law firm partnership votes may be a “questionable” way to decide management decisions, the report authors write.
“Many law firm partners believe they have an economic model that has served them very well over the years and that continues to produce good results today,” the report says. “They are consequently reluctant to adopt any changes that could put that traditional business model at risk.”
The study provides further data and analysis from a variety of sources, including Thomson Reuters, Altman Weil, and the Am Law 100 list of the highest-grossing firms, and attempts to offer recommendations to firms. The full report is available here.