Firms told to get priorities straight
The billable hour tells clients they are not the priority of the law firm, according to an international legal industry expert.
Canadian analyst and consultant Jordan Furlong (pictured) told Lawyers Weekly the traditional law firm is structured for the benefit of its owners first, employees second and clients third.
Mr Furlong explained that at the core of most firms is the billable hour, which does not encourage efficiency, quality assurance, client communication or the happiness and health employees.
“No business model that truly prioritised clients’ interests would entrench the billable hour as its pricing and compensation capstone,” he said.
Mr Furlong will run a masterclass titled Integrating New Law into Your Law Firm at the Australasian Legal Practice Management Association conference to be held in Queensland this September.
The sessions will focus on how traditional firms can adopt the innovative practices of New Law firms to improve their internal operations, such as legal project management and working with contract lawyers.
However, Mr Furlong said these “minor adjustments” will have limited gains; if firms are to truly adapt to the new legal landscape they must make substantial changes to their structure and culture, starting with how they price work and compensate employees.
Specifically, time-based billing and remuneration models that reward lawyers for business acquisition and docketed hours need to go.
While Mr Furlong admitted the traditional law firm model has historically been profitable and delivered quality services to clients, he stressed that clients are unsatisfied with the size and unpredictability of legal bills and the quality of customer care they generally receive from law firms.
“In a client-first market … the old law firm model is breaking down,” he said.
The rise of substitute goods in the legal market is posing the greatest threat to traditional law firms, according to Mr Furlong.
Transactional, clerical, research and knowledge tasks that have powered millions of billable hours in the past will leave law firms and go to lower-cost but sufficiently competent substitutes, he said.
“Clients have choices that they’ve never had before; they can use a paraprofessional or a software program or an out-of-jurisdiction lawyer or a New Law provider instead of, or as a complement to, traditional law firms.
“Maybe they’ll only get 80 per cent or 65 per cent of the quality and impact of a law firm, but they’ll get it for 40 per cent or 25 per cent of the price, and that’s good enough.
“And over time, those gaps will close. We’re no longer the only game in town, and we never will be again.”
If firms want to continue offering these services, they must adopt the methods and motivations of New Law rivals; alternatively, firms can relinquish those tasks and become smaller and higher-value entities, Mr Furlong said.
“These are the choices that social, economic and technological forces beyond our control are offering us; all that’s really left for us to decide is how we’re going to respond.”