The legal industry is facing a number of challenges in line with the global financial crisis. But once the economy picks up, just what will the legal profession look like? Angela Priestley reports
The crystal ball suggests that the legal sector of the future will look markedly different to its current state. Expectations of change exist across all tiers of law. But just what that change might look like is still a great unknown.
Well away from the current drop in work threatening Australian law firms, there are a number of systemic issues facing the legal services sector that are likely to bite well into the future. Clients are demanding more, and while technology might be improving efficiencies, it has also presented some additional competition.
At the same time, 60 per cent of new graduates coming into the profession are women, according to the Law Society of NSW, yet commercial law firms have a long-term tradition of being dominated by men.
Meanwhile, the current tight state of legal recruitment is likely to loosen, meaning law firms will once again face talent retention issues and the drain of locally trained lawyers to overseas jurisdictions. The future is also likely to see the significant issue of succession come to a climax, as the typically dominant baby-boomers in the market move toward retirement.
On the other side of that coin, however, there is the view that in a country of 22 million people, we might just have far too many law firms.
The question is, will the recession be the catalyst required to see these fundamentals addressed in the near future, igniting change across the profession?
At a LexisNexis (publisher of Lawyers Weekly) roundtable event held in Sydney recently, ten key decision-makers from various types of Australian law firms linked these issues across small, medium and top-tier, by discussing them within the context of their own experience in law.
A changing of the guard
Already the pendulum is swinging in the direction of a brave new world for the law profession once the economy picks up.
At Allens Arthur Robinson, chief executive partner Michael Rose believes clients are already realising that quality of legal services is simply not a given, and that using lawyers merely as facilitators is not necessarily in their best interest. Instead, clients are demanding loyal advisers.
"I think there is a process happening now where at least some groups of clients are positioning lawyers in that way," said Rose. "I think the challenge for us is in grabbing that sense, and using the current atypical environment to reposition the profession there."
Rose said the current crisis has already fundamentally impacted the profession. "Lawyers have been complacent in the way they've bidded for work," he said. "You've ended up with a situation where the real role of lawyers is as facilitators of transactions, as opposed to people who are there to protect the interests and provide a little advice."
It is possible that such a catalyst could extend into another systemic issue facing law. Depression, which in a law context has been related not only to long hours of work, but also to the fact that certain types of that work are fundamentally dry.
"I think by doing that [repositioning the profession], it will also provide the purpose and mission that's missing from careers," said Rose. "You didn't go to law school for a long time, you didn't serve an apprenticeship in a law firm, to become one of ten facilitators on a deal; you did it to become a trusted advisor to somebody."
Being that trusted advisor could very well assist in heightening career satisfaction levels.
Getting there a challenge
Christopher Freeland, chief operating officer at Gilbert + Tobin, believes that entrepreneurial and innovative partners, currently in high demand, will prosper in a repositioned profession.
"Part of it can be trained and observed, but it also takes a particular style of person and it's that style of person, I think, who is going to thrive and who clients will go to in the future," he said.
Managing partner of Swaab Attorneys, Fred Swaab believes that it's in this "atypical" period of global recession that these innovative leaders should come forward. Like Rose, he believes that, to an extent, the profession has become complacent and moved away from its once traditional roles as gatekeepers of transactions.
"Years ago, the bank manager and the lawyer determined whether you did a deal or not," he said. "Now lawyers are just sort of picking up the pieces after they attempted to have been put together."
But becoming known for that innovative spirit will require some work and initiative that Dr Peter Ellender, chief executive officer at Carter Newell, believes many lawyers are uncomfortable with. "They feel like they're blowing their own trumpet. They feel that they shouldn't have to show off; they should concentrate on doing quality work instead," said Ellender. "In reality they need to be demonstrating that they are adding value at all times."
Turning back the clock
This may mean that the profession has the opportunity to turn back elements of the commoditisation of law. If lawyers are to return to their glory days as respected trusted advisors, they need to escape the ideal of being available only for transactional work.
The difficulty, though, may be in the fact that clients could very well be a law firm's own threat.
"There's a level of sophistication of clients who started to do things without lawyers," said Swaab. "And lawyers had to clamber in and try and lock on."
Steve Sampson, national general manager at Hunt & Hunt, said that the threat could also be in the billable hour. "I think the billable hour fronts up somewhere in this discussion. I think the whole focus on productivity, efficiency, profit, partner earnings just drove mistrust into what were otherwise strong trusting advisor relationships. ... Every time you talk to a client, they are wondering how many units, how many hours, you'll charge."
Looking forward, Howard Harrison, managing partner at Carol O'Dea, believes that there might be scope for two sectors of law: "One will be the valued advisor - high end, really charge what you want because that's what your clients should pay," he said. "At another level there is a huge move to fixed pricing, certainly - caps, outcomes, gear, remuneration."
The balance of living
Still, for many, true satisfaction in law relies on the ability to reach a balance between work and life. For the 60 per cent of all law graduates who are female the issue could be particularly pertinent, and one the profession will need to find clear solutions to in order to retain its talent.
Citing figures from the NSW Law Society, Stuart Westgarth, junior vice president of the Law Society and partner at HWL Ebsworth, said that the statistics are more significant than many firms might believe. In NSW, the makeup of the profession currently sits at 55 per cent male and 45 per cent female. With such a high percentage of female graduates, that breakdown is likely to change drastically in the coming years.
Westgarth makes the point that women are mainly in corporate jobs, compared to the significant portion of men in private practice. "In asking yourself what is it that women are looking for in terms of their professional life, you might say, 'Well, what is the difference between private practice on the one hand, versus government and corporate on the other?'" said Westgarth.
The decision-makers of law firms agreed that work/life balance can exist in most practice areas of law, and some cited clear progressions made in the area - particularly in encouraging women to come back the firm after taking maternity leave, and also in ensuring women sat at the partnership table.
The perils of the dirty few
Just as the law profession moves to reposition itself, it must also face a battle over reputation. Small incidences of bad behaviour on the peripheries of the profession is having drastic consequences on law firms, resulting in negative public perceptions of law and the raising of questionable levels of regulation.
"We're getting Keddies as a major player in our legal games," said Swaab. "They are so far removed from the reality of law, yet they are frontline material, and the law society comes back with the Attorney-General and confronts the legal profession with over-regulation."
"Nothing irritates me more," added Rose, "than bad behaviour in a part of the profession that has nothing to do with us turning up in regulation."
Graeme McFadyen, Trilby Misso chief executive officer, said the reality is that the number of lawyers involved in such bad behaviour is usually very small. "Regrettably, certain lawyers attract headlines, and the attention of the regulators."
Moving forward, Harrison said that the profession needs to get involved in conversations to ensure their interests are heard. "We need to be part of the conversation which leads to some sort of sensible legislation, where the baby is not thrown out with the bathwater."
And just before we get there...
Most of the major law firms have now made some sort of cutbacks in line with the global recession and/or imposed a salary freeze across their offices. The major long-term challenges facing the legal profession, and the ideas on how to overcome that, have in some measure been cast aside as the economy instead imposes new challenges.
"I think the next five years will be an atypical period because of the global financial crisis," said Westgarth. "I think there are going to be huge pressures on charge-out rates for the next 12 months, and the next two years. I don't think that will necessarily lead to innovation in the way we charge; I think we'll just see the rates go down."
Put simply, said Westgarth, it is a matter of law firms coming to terms with a reduction in the aggregate volume of work available. "Otherwise there wouldn't have been redundancies."
The future looks likely to bring as many opportunities as it does threats. Just what they look like, though, only time will tell.
See the next Best Practice supplement on June 19, to read what opportunities the panel identified in technology, and for the structure of their firms in the future.