Although the coronavirus may have slowed our economy to a standstill, it’s quietly catalyzing a whirlwind of fast-paced changes for the legal industry. Whether you realize it or not, a long chapter in our profession is coming to a close. For firms that started preparing years ago and that continue to adapt, these seemingly bleak times will give way to brighter days soon. Firms that spent the past few years with their heads in the sand will be lucky to make it out of this at all; if they do, unless they pivot hard now and start sprinting, they may find darker days ahead for the foreseeable future.
We Knew Something Was On Its Way
I’ve long argued that a reckoning is coming for the legal industry, but I always figured it would be a gradual process of changes accreting over a few years. The signs of malaise and stagnation have long been evident. The legal industry felt the Great Recession’s impact as hard as most any other profession. Yet despite twelve subsequent years of the larger economy bouncing back and thriving, the legal market had barely gotten back to where it was before the bubble popped in the first place.
Why did this happen? In large part, it’s because Biglaw spent the better part of the past decade meandering along behind the curve. Law firms are notoriously slow adopters of technology. How many law firms with eight-figure annual revenue streams or more are still maintaining paper libraries? How many partners are still dictating letters into miniature tape recorders? Progress comes slowly in the legal industry — and often with ample resistance.
So, yes, we’ve long had reason to expect the legal profession was teeing itself up to get fundamentally altered, and there have been any number of candidates we expected to force the issue. The Big Four accounting firms and Alternative Legal Service Providers like Axiom and Kira Systems are all making plays to eat up Biglaw’s traditional market share. Clients are continually pressuring us — and turning to our competitors — for efficient delivery, price certainty, and lower fees. The changing demographics of Biglaw itself also augured change, as Millennials increasingly step into firm leadership, Gen X takes the reins, and some Boomers transition practices. We knew the profession was going to go through some fundamental changes, but that always seemed like a problem for tomorrow.
And then came the coronavirus, and suddenly tomorrow is here.
A New Era
I’m writing this piece from home, and I’d bet dollars-to-donuts you’re reading it at home as well. Almost all attorneys and legal professionals I know are either fully teleworking or under orders to strictly limit in-office time. The changeover seemed to come out of nowhere for many, and it brought with it a host of follow-on problems.
Most firms have had work-from-home options available for their attorneys for years, but few, if any, had the infrastructure in place to handle the entire roster of attorneys logging into their VPNs at once. Further, many of those work-from-home systems assumed that professional staff would remain available in the office to turn our Word docs and PDFs into actionable product. My firm was lucky enough to have administrators with the foresight to ramp up our teleworking capacity a few months back. Others have been forced to play catch-up and absorb the weeks of lost productivity and lost revenue that comes with it.
Logistical problems like that are likely just the tip of the iceberg, however. All signs are pointing to an economy that will feel the residual effects of the COVID crises for years to come. In the short term, firms are going to feel crushing financial pressure. Forcing an entire workforce not accustomed to teleworking to do so interferes with productivity in the best of times. And these are not the best of times. Most firms will take a revenue hit this year.
But it’s not just the short-term impact of the coronavirus lockdowns that might rock law firms in the coming months. That may be just the beginning. If the economic pain deepens, as many economists believe it will, more businesses will close their doors. Others will tighten their belts and keep work in-house, or shop around for different providers and better rates. Slow-pay and no-pay clients may become increasingly the norm. All of these realities threaten to further squeeze the bottom line of an industry that was finally getting back into fighting shape. Depending on the scope and duration of the downturn, expect to see firms that are slow to respond — or that were already weak — begin to collapse.
Not everyone is looking at the new normal as gloom and doom, however. I coincidentally spoke to the founders of cloud-based, distributed law firm FisherBroyles a few weeks back, following up on my piece a couple of years ago profiling their model. They’re knocking on the door of the Am Law 200, and surprisingly this crisis might be what puts them over the top.
“[E]very other law firm tries to pretend that they can work remotely and avoid the coronavirus, when we are the experts at working remotely,” said founder Kevin Broyles. It’s hard to argue with him. Cloud-based firms that have already folded social distancing into their day-to-day practice were able to shift into virus-mode without a blip.
Equally important, though, is the firm’s potential to leverage its strengths and actually grow during this time. “We’re not just recession-proof. We thrive when there’s a recession,” said co-founder James Fisher. The firm’s streamlined overhead model allows the firm to offer clients lower, appealing rates in these tough economic times. Because the firm pays its lawyers a percentage of revenue only after its collected, the firm doesn’t need to worry about adjusting salaries to match production.
FisherBroyles surely isn’t the only entity looking at this pandemic as a chance to shine. Firms that have failed to keep up with the times are going to face painful realities, as the coming months separate those firms that have been preparing for the future from those that thought momentum would carry them forever.
Best of luck out there, everyone. We’re going to need it.
James Goodnow is an attorney, commentator, and Above the Law columnist. He is a graduate of Harvard Law School and is the managing partner of NLJ 250 firm Fennemore Craig. He is the co-author of Motivating Millennials, which hit number one on Amazon in the business management new release category. As a practitioner, he and his colleagues created a tech-based plaintiffs’ practice and business model. You can connect with James on Twitter (@JamesGoodnow) or by emailing him at James@JamesGoodnow.com.