Biglaw

Can Biglaw Go From Hoopty To Hot Rod?

What Cloudlaw can teach Biglaw.

By  
on

“It’s very hard to convince a bunch of millionaires that their business model is broken.” In one sentence, Marc Taylor of Taylor English sums up the biggest challenge facing Biglaw in the face of the changing legal market. Traditional approaches have worked so well for so long, why change now?

The answer is necessity. Firms that don’t adapt face a long-term existential threat on multiple fronts, including the virtual law or cloud-based revolution that I’ve been writing about these past weeks. Leaders of these new firms tend to frown on the “virtual” nomenclature — noting there’s nothing “virtual” about their firms — so we’ll embrace the Cloudlaw label. Cloudlaw is fundamentally about reimagining the legal practice from the ground up. By slashing overhead, leaning heavily into technology solutions, and pushing more revenue to the partnership, Cloudlaw firms are taking ever-increasing bites out of Biglaw’s market share. They’re taking the classic boutique model and attempting to grow it into a world-beating phenomenon.

The brick-and-mortar legal industry isn’t going to go down without a fight. I strongly suspect we’re going to see traditional firms attempting to steal Cloudlaw’s innovations and graft them onto their own practices. Telecommuting is already making its way into Biglaw more and more. As the benefits of a distributed practice become more apparent, and as Cloudlaw’s shadow continues to loom larger, the race will be on to adopt Cloudlaw techniques in the traditional Biglaw world.

Our Own Worst Enemies, Revisited

However, as much as I expect Biglaw to want to take on the benefits of virtual practices, I don’t expect it to be easy. Lawyers are notoriously averse to change. In recent surveys, a full 90 percent of clients gave their law firms a “low” rating when it came to innovating their legal service model, and nearly 70 percent of law firm owners surveyed said their partners were the biggest force resisting change. It’s all too easy to shoot down innovation in the name of preserving some firm culture or tradition, when the real motivating factor is fear of the unknown.

Take for example the largely production-based, eat-what-you-kill compensation models that functionally all Cloudlaw firms seem to have adopted. This sort of structure seems essential to the Cloudlaw model, but why would a senior partner at a Biglaw firm want to change course as they’re finally getting their time on top? Their secretarial support is great, their offices have the best views. Why give those up in the name of overhead reduction? Plus, they’ve built up their equity in the partnership over years. Someone who put in decades of paying dues and supporting the lifestyles of the partnership above them, is going to want their turn on top.

As we’ve established time and again in this column, though, the good times are already over. By all appearances, the legal market peaked before the mid-2000s, hasn’t recovered all that well since the Great Recession, and seems poised for another crash if the economy dips again. It’s change or die time.

Sponsored

Overcoming Inertia

There are fundamental mismatches in how Biglaw and Cloudlaw were designed. I’ve previously compared Biglaw to a Rolls Royce. It’s big, fuel-hungry, and oozing with excess, but with a reputation built on decades of high-end performance. Cloudlaw is more like a Tesla. It’s sleek, hip, new, tech-driven, but also has less of a track record and plenty of skeptics ready for it to fail. While both vehicles have the same essential function and shape, they were designed in different times, and address different needs and desires. Mixing and matching their parts could breed success, or it could quickly get weird and ugly. You could theoretically retrofit a Rolls Royce to take a Tesla powertrain, but would it really be worth it? Or would you just end up with a strange combo, a Frankenstein’s vehicle, that tries to be everything and just ends up not really doing anything well?

This isn’t just a metaphor. It’s already happened. As electric car manufacturers started making progress toward marketing full-electric cars, the established fossil-fuel automakers tried to incorporate electric options into their existing vehicles. Some attempts, like the Prius, were successful. Others, like countless plug-in hybrids, got poor reviews for having limited range and being slow — they just don’t seem to do anything well. You can’t slap a Duracell to the bottom of your Model-T and compete with cars designed to be all-electric from the ground up.

The New Breed

The future of brick-and-mortar firms may look a lot like Taylor English, whose founder I quoted at the top of this article. This Atlanta-based firm seems to have found a productive approach to straddling both worlds. Taylor English started out like the classic boutique firm built out of dissatisfaction with the strictures of Biglaw. It was founded in 2005, before most of the technical innovations behind Cloudlaw existed, but it already had a Cloudlaw-like ethos embedded in its culture. Compensation was heavily production-based, with big percentages of revenue kicked back to the partner who generated the work. Rates were largely set by the attorneys charging them. Technology was prized, and innovation was key.

Sponsored

Given that its values were already aligned with the Cloudlaw concept, it’s little wonder that Taylor English has flourished in adopting Cloudlaw principles with a brick-and-mortar bedrock. The firm maintains a central office in Atlanta, but new attorneys are offered the opportunity to work remotely, with the overhead savings being passed on to them. Attorneys looking to climb the ranks into equity partnership are encouraged to start establishing a physical presence in the building, since that physical proximity is considered key to developing firm culture (and facilitating cross-sales).

By allowing attorneys to work from home, Taylor English keeps the cost of growth down. Attorneys it chooses to bring in can be incorporated for very little cash outlay as they build their books of business. That low barrier to growth is fundamental to Cloudlaw. Once those books are built, though, it expands its brick-and-mortar presence to facilitate the culture, internal marketing, and community presence advantages that Biglaw has long relied on.

These modern, tech-oriented values married to a traditional practice structure are working well, at least in metropolitan Atlanta. This kind of hybrid model may be the answer that Biglaw firms outside the Am Law 25 need to stay relevant in the modern legal economy. Getting there is going to require some deep soul-searching, and possibly a deconstruction of the basic culture and assumptions underlying many of these firms. It’s not going to be easy, but easy and necessary rarely overlap.

Those willing to question their fundamentals have a shot at staying in the race. Those who don’t are just biding their time until they run out of gas.

James Goodnow

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 an NLJ 250 law firm. He is the co-author of Motivating Millennials, which hit number one on Amazon in the business management category. You can connect with James on Twitter (@JamesGoodnow) or by emailing him at James@JamesGoodnow.com.

Topics

, , , , ,