New Age And Traditional Law Firms: The Need To Take A Long View

The traditional law firm. Downtown offices. Nice conference rooms. Receptionists, admin assistants. Partners with large corner offices. Plenty of associates slaving away billing 2,000+ hours per year in hopes of grabbing the brass partnership ring. It reeks of tradition.

Contrast that with new age firms. AI does the work of associates. Lawyers are remote. Firms may even be loose confederations of individuals. And the business model is not based on the billable hour.

Sounds cool. But can the new age model be sustained?

New Age Law Firms

One model of the new age is the AI first firm. These firms consist of lawyers, mostly more senior, who leverage AI to do most of the work that all those associates in traditional firms used to do and bill for. The theory is that the value and reduced costs by engaging AI can be passed along to clients. Clients who, in turn, flock to the firm, and the firm’s revenue and profit is either maintained or even improved than that of traditional firms. Having inexperienced lawyers in these firms is frankly a drag on that idea since they offer less value and require more supervision.

Another model is the remote-only firm. The lawyers in these firms are all geographically remote from one another. If they have offices, they are small. Real estate costs are low and because the lawyers can work from anywhere, the firm can grab the best talent irrespective of where that talent is located. Typically, these firms are tech driven and, like the AI first firms, lean heavily into AI. They have few associates since training and supervision is difficult given the remote working environment.

Or even more extreme: there is no firm at all, just a sort of loose network of lawyers who come together to work on a matter and then move on to the next one while all the while leveraging AI. In the words of Gertrude Stein: there is no there there. No fixed overhead, no infrastructure, just collective expertise assembled on demand.

All of these models, which I call new age law firms, disrupt the traditional leverage model by utilizing technology and remote work environments. They are no longer trapped by the billable hour mentality of traditional law firms, and they can bill based on things like value and expertise. They hope to offset any loss of revenue by moving away from the billable hour and increased work, subscriptions, and reduced costs.

Again, it sounds good. Particularly for clients who can get better results by having senior people more intimately involved in their matters, benefit from their expertise, get lower legal bills, and welcome greater predictability brought about by the alternative billing methods.

If all this works, the traditional law firm model sounds like it may be in trouble. Maybe not at the top end where Am Law 50 firms will always handle bet-the-company matters and cost is not a factor. But that’s less true for smaller and midsize firms. While the theory that the innovative firms can draw more and more business in the short run may be valid, what about the long term?

The Traditional Firm Pipeline

The traditional law firms do have something the new age firms don’t have and which they need. The traditional model assumes that associates will be brought in from law school largely untrained in the practicalities of the practice, the how and the why of being a lawyer. Things like strategy and vision, how to keep clients happy, how to find solutions to problems, how to be profitable, how to market, and how to keep the lights on. In short, not only the practice of law but how to run a firm.

As associates progress in the traditional law firm, they gradually learn and develop, take on more responsibility, become partners, bring in business, and become firm leaders. It’s that opportunity to become an experienced lawyer that the traditional firm has historically offered.

The new age firms, on the other hand, are composed of primarily experienced lawyers, mainly poached from the traditional law firms. They come fully formed and ready to go. That’s all well and good and, for that matter, fair. But the new age firms, by and large, aren’t thinking young lawyer development.

The Future for New Age Firms

Fast forward into the future. The new age firms don’t have associates to move up the ladder. If traditional firms start to flounder or no longer offer the kind of training associates have historically received, who will replace the experienced lawyers in the new age firms as they age out? How will they be able to offer the same expertise and talent if that talent is not being developed as elsewhere?

Of course, there will always be traditional firms where associates learn to be good lawyers. But traditional firms will be forced, sooner or later, to do some of the things the new age firms are doing to stay competitive. That means greater use of AI to do the tasks younger lawyers used to do. And inevitably it means fewer opportunities for young lawyers to grow.

As a result, there won’t be as many of those experienced lawyers around for the new age firms to grab up. What experienced lawyers there are will cost exponentially more.  It’s simply supply and demand. And if the pipeline closes, the cost advantage of the new age firms and, for that matter, to clients, could wither.

One other thing; I’m not big on “firm culture” since most firms within certain size parameters that bill by the hour have similar cultures.  But there is an advantage to working at a firm and come up through the ranks. You know the clients, you know the people, and you know the traditions. And when it comes to management, knowing how people react, knowing their strengths and weaknesses through experience, is valuable. But by definition, new age firms have little of that to fall back on.

Bottom line, for the new age firms to succeed long term, they are going to need the talent to do the work and the managerial skills to run the firm.

There Is an Alternative

So, it’s fair to ask whether the new age firms can survive in the future if they continue on the same course.  And if clients are licking their chops at this opportunity for lower and more predictable fees, they best think twice as well. If young lawyers aren’t adequately groomed for the future, client service will ultimately suffer, and the cost of expertise will skyrocket.

There are solutions, however. It starts with the recognition of the potential and looming problem.  From there, new age firms will need to somehow invest in training younger lawyers and thinking seriously about succession. Succession not just in terms of leadership but in terms of experience and expertise in their practice.  

To do this, they need to invest in law schools and offer training programs much like some of the vendors are already doing. It means investing in hiring younger lawyers and bringing them along like the traditional firms have historically done even if it negatively impacts profit. It means a commitment to more formal training such as robust mentorships and simulated training.

And it means doing things like educating clients about the need to invest in the development of younger lawyers knowing there will be a cost but looking to the future for the return.

The profession is not known for this kind of thinking but perhaps new age firms, less bound by tradition, can lead the way here just as they are with things like work processes and business models. For the long term, new age firms will need to groom younger lawyers and future firm leaders. The firms that do so in the future will thrive. Those that don’t? They may become extinct.

It’s a different world. Thinking that there will always be a pipeline of experienced lawyers there for the asking or failing to plan for the line to run dry is also a recipe for extinction.

Traditional firms are notorious for not looking down the road. New age firms say they think differently. That they are on the cutting edge of the future of law. Maybe so. But if they want a future, they also need to invest in it, not stick their heads in the sand like their traditional brethren at whom they scoff.

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Stephen Embry is a lawyer, speaker, blogger, and writer. He publishes TechLaw Crossroads, a blog devoted to the examination of the tension between technology, the law, and the practice of law.