Things to come: A day in the life of a lawyer in 2036

The classic film Things to Come, based on a novel by HG Wells, imagined what life would be like in 2036. As we get closer to 2036, we can see more clearly what that world will be like. In this article, I will share with you my predictions of what a day in the life of a UK-based lawyer may be like then.

Unlike the filmmakers of 1936, I do not believe that we will be travelling to work in flying machines. My future lawyer is still commuting by car, train or tube. As the lawyer travels to work, she is checking the latest price of her shares in her firm, FutureLaw Limited, and having a quick look at the new legal top-50 listings.

She is thinking about her busy day. She will be having lunch with a client and the firm’s director of pricing to discuss the European quality and cost structures that she is proposing to her client for the next three years. There is preparation to be done for her appraisal of a senior lawyer. She must finalise the objectives that will be linked to the lawyer’s share option package.

Later, there is a meeting at the London HQ with the new CEO who has just joined the firm from an international media business. She has to brief the new boss on the division which she is responsible for that operates from Exeter. There may be an opportunity, she believes, to buy up part of a competitor and she wants to pitch him her idea.

Some of you will think that the day I imagine is just science fiction. Others will have days like this already. But, what I am imagining is the logical result of the challenges that the profession faces. I have been discussing these challenges in recent articles and I believe that they will change our lives fundamentally.

In my September 2012 Managing Partner article Live or let die, I concluded that, for law firms to survive, they need to plan for:?

• different ways of providing legal services;

• diversification of the business;

• greater investment;

• more structured careers;

• lower income but higher capital returns; and

• corporate management.?

In my May 2013 Managing Partner article Walking dead, I identified that complacency, inactivity and fear are threats to us and that we need to grapple with:?

• the will to make decisions;

• management that is empowered;

• succession planning;

• a modern business structure; and

• performance management that is linked to reward.?

In this article, I will draw together these challenges and show how they will shape law firms in future through the example of how FutureLaw will be operating in just over 20 years. Come with me to 2036.

Legal services provision

In 2036, there are different ways of providing legal services and diversification of legal businesses.

FutureLaw, in whatever space in the legal market that it operates, is providing services that are targeted at the needs of specific clients. All or most of those services have been broken down into processes that are delivered using technology operated by low-cost employees. The well-paid lawyer is providing only a limited range of high-cost specialist work or has, like our future lawyer, moved from being a lawyer to a manager.

It was inevitable, FutureLaw realised many years before, that parts of any legal process needed to be streamlined and provided in a more efficient and cost-effective manner. This was because, after the financial crash of 2008, clients worked out that the economic circumstances in which lawyers then operated gave them a strong negotiating hand.

Big organisations became ruthless in the use of tendering processes. They knew that they could force the price of professional services down, and further down again. So, lawyers needed to think more about what clients needed and what were their unique selling points. They also needed to find ways of delivering their services more cheaply. The profession slowly came to understand that, whether it was low-cost litigation or high-value diligence, different elements of the process could be identified and then delivered by low-cost staff.

For instance, most due diligence could be provided very efficiently by well briefed and supervised paralegals. Elements of litigation were automated using case management systems. Clients understood that many documents were based on precedents and did not always need a large amount of tailoring, so expected any savings that were created by computerised precedents to benefit them as well as their lawyers.

FutureLaw understands this challenge and so provides what clients want. It sells to the client what the client wants, and it knows what the client wants by asking the client what it wants.

A one-stop service is a popular FutureLaw service. Clients no longer care if the advocates presenting their case in court are employed by their solicitors rather than working as independent practitioners in chambers.

For many years, accountants extended their range of services to their clients very successfully. FutureLaw knows that, if lawyers are to remain attractive to their clients, they need to follow the accountants and offer clients a wider range of services tailored to their needs. Accounting packages, training, patent work, company secretarial, lobbying, estate agency and brokerage are all services that FutureLaw provides or is market testing.

Career development

There are more structured careers, including succession planning in 2036.

There are many rungs in the career ladder in FutureLaw. There is a clear career structure. While legal knowledge and intellectual rigor are essential, success is measured not just against legal skills but also business skills and experience, such as project management skills, business development success and management ability. Ambitious lawyers at FutureLaw expect to be set targets and want to ?know that, if they achieve those targets, the business will benefit and they will benefit as well.

Inevitably, some lawyers of the future still do not feel comfortable in a more target-driven environment. Some do not want to rise to the top of the management tree. There remains a place for them within FutureLaw, but not as leaders of the organisation. The method of delivery of services means that the career structure and skills base of the early twenty-first century has been rethought.

Partners have disappeared from ?most law firms. This process began ?after the introduction of alternative business structures (ABSs) as new entrants to the market structured themselves in a corporate manner. People then began to ask what is so important about being a partner.

People used to become partners for a variety of different reasons – some because of their technical skills, others because of their ability to attract clients and some simply because they had been in a firm for a long time. It became clear that the leaders of future law firms are, generally, not going to be the best technical lawyers.

Leaders are those who can build the business, attracting and retaining clients by providing services the clients want in the way that clients want those services delivered. Those with the technical talent will still be able ?to sell their ?services, provided they have the ?expertise and experience that is ?needed by the marketplace.

FutureLaw understands that law firms have to consider who in the business is key to achieving the strategy that had been identified. It is important to the management that they understand what it is that will keep their key people engaged in the business. They know that some people can be replaced and therefore they do not need to bind them in to FutureLaw. On the other hand, there are people whose contribution is so important to the firm that they need to have incentives that encourage them to remain.

It is common to find that different people have different ambitions, so the managers work to understand the ambitions of their lawyers and support staff. Some prefer the security of a stable and reliable income. Some are driven by status. Others are ambitious and want to participate in the business by acquiring a stake in FutureLaw. The management has to answer these ambitions.

Business structure

The law firm of 2036 has a modern business structure with the will to make decisions.

FutureLaw is a limited company. As the badge of partner became redundant at FutureLaw, so did the traditional role of partner. Law firms like FutureLaw realised that a business could not be run effectively by a large committee. Such a model led to compromise and risked stagnation and inactivity. The way in which traditional partnerships and LLPs had been run is no longer fit for the modern world. Some LLPs survive as a legal structure, if only for the tax advantages that remain available, but operate on a corporate basis.

In the world of FutureLaw, most of the legal top-50 service providers are limited companies. In 2036, there are only 50 law firms of any substance. In this corporate model, the shareholders invest and trust the management team to deliver on a business plan. Shares in FutureLaw are available not just to the senior members of the company but also to others who wish to invest in the business, from both inside and outside the business. Shares or options over shares are offered as part of the reward package by the management.

An internal market for its shares has been created by FutureLaw under which employees can buy and sell shares. One of the aims of the business is to generate for its shareholders a capital return on their investment. This is achieved by valuing their shares in the business, including goodwill, and finding a buyer for those shares. If FutureLaw remains a healthy and successful business, it will have a value and will have buyers willing to invest and provide a capital return for shareholders.

But, FutureLaw is always on the lookout for external investors and keeps under review the possibility of listing the company. FutureLaw knows that not every legal business will be attractive to external investment. However, every legal business will need investment to achieve growth and deliver an excellent and innovative service that will attract not just clients but also talented staff. Those firms that are not successful and cannot generate capital returns will not attract ambitious lawyers and managers.

This model did not work for all firms. In the 2010s, it became clear that the market for legal services was both shrinking and also being fought over by new entrants. Some firms disappeared overnight. Others went into a slow spiral of decline, either because their partners would not or could not react to the new reality. The traditional business model became less attractive to more and more clients, lawyers and support staff. Many of these zombie firms did not understand that they were in decline because there continued to be enough clients who were loyal enough to allow these declining firms to make a decent living for 10 or 15 years, by which time most of the partners responsible for management had retired.

Corporate management

A board of professional managers runs FutureLaw, some of whom have worked their way up through the career structure as lawyers. Other have been professional managers. Some have been recruited ?to the board.

In 2036, it is considered ridiculous that lawyers ever resisted the idea of employing professional managers to run their affairs. It is understood that businessmen who are experienced and trained in the art of management are capable of running a law firm in the same way that previously they may have run a machine tool business. There remain unique management issues in a law firm, but only in the same way that there are unique management issues in a machine tool business.

FutureLaw understand the need to empower all levels of non-legal management and support staff. The days of them and us, partners and others, have passed; consolidation of the profession and the new entrants ensured that.

Despite the fact that businesses are driven by the needs of clients, the fear of some lawyers that there would be a loss of professionalism has not occurred. FutureLaw sees itself first and foremost as a law business and, even while some may see it as a law factory, the requirement for professionalism is a key selling point in the market; regulation by the state has not gone away. The champions of professionalism are not just the lawyers but also the professional managers, which includes those who bring to FutureLaw years of experience in risk management.

The professional support teams at FutureLaw allow the firm’s skilled lawyers to concentrate on the technical issues of the law. Business development teams generate work, while pricing professionals negotiate the fee rates and other terms. Quality control managers ensure smooth delivery of the services in a manner that is most convenient to the client.

Overseeing all of these processes is the FutureLaw management team. Their brief is to develop and deliver a strategic business plan that is nimble, reacts to the market, motivates staff and adds value to the business.

Performance management

One of the key issues for FutureLaw is motivating staff at every level and ensuring that reward is delivered fairly and transparently. A vital role at every level of management is to set clear objectives that are aligned with the firm’s strategy. The level of reward is then linked to the delivery of those objectives.

As a corporate entity that has created a market in its own shares, FutureLaw is able to use an option scheme to incentivise key members of staff. In order to create value for the option holders, the firm has medium and long-term strategies that embrace both a medium-term internal market for shares and a long-term exit strategy.

That exit could take several forms. It might be a trade sale or an initial public offering, listing the company on AIM or another market. It may be possible to structure a management buyout.

The next layer of FutureLaw management could be offered the opportunity to buy a controlling stake in the business through a new vehicle, with the vehicle funded by debt or a venture capitalist. The reality of this taking place largely depends upon the ambition and quality of the next generation of FutureLaw managers. That dictates a strategic imperative for the current FutureLaw management team to invest in and nurture talent.

Financial management

In 2036, there will be lower income but higher capital returns and greater investment.

FutureLaw is a corporate model that has broken with the traditional law firm model that was used for hundreds of year. It aims to generate a capital return, not just for senior members of the business, but also for anybody who is prepared to make an investment. The trade-off for a capital return is a lower annual income so that more profit can be retained and invested in the business, in order to generate growth and value.

One area identified for investment by the FutureLaw management team is foreign expansion. Continuing globalisation means that more and more clients are operating across the world and FutureLaw wants to offer services to clients wherever they operate.

Start with a vision

Let me bring you back to 2013. Whatever you think of this picture of FutureLaw, (and what I describe is already far closer than 2036), you cannot pretend that we are not all going to have to change. Just a few years ago, very few lawyers would have imagined, in their wildest nightmares, that a haulage company (Eddie Stobart) would be offering legal services to their clients.

All businesses must keep their objectives and processes under review so that they anticipate and meet the changes to their market. Obviously, the legal profession today is in the midst of dramatic change: ABSs and new entrants; changes to legal aid; and litigation models being revised. So, if you have not done so already, you need to undertake a radical rethink of your whole business model.

The starting point for these sorts of discussions is to consider what the key players want from the business. You have several choices. Do you see the business as a source of income over a long period, in other words providing you with a career and a secure income? Do you see it as a means of creating a valuable capital asset which you can then realise through some form of exit in the short to medium term? This option is now feasible. Do you see it as both, in other words you would like to receive a decent income from it for as long as possible, but the long-term aim is to then realise a capital return?

Your main stakeholders need to have a discussion around these issues and understand whether or not you all have the same ambitions for the business and, if not, what your different ambitions are. If you can establish what you all want from the business, it will inform your choices.

Having come to a conclusion, you then have to decide what the business needs to do in order to deliver on those ambitions. What is your market, and is it the right market to be in? Are you in the right location? Do you have in the firm the right people to achieve your ambition? Do you need to be bigger or smaller, local, national or international? You must map out how you intend to deliver your vision.

Once you know what your aim is, you can decide what support you need and plan and structure your business in a way that will deliver on that aim. But, in reaching that aim, you cannot ignore the future prospect of FutureLaw, its service delivery model, corporate form, professional management, career structure and reward arrangements. As the great visionary HG Wells put it, “adapt or perish, now as ever, is Nature’s inexorable imperative”.

Guy Vincent is a partner and the former managing partner at UK law firm Bircham Dyson Bell (www.bdb-law.co.uk). He specialises in legal and management issues facing law firms.

 

Note: Any resemblance to any existing or ceased firm named FutureLaw is purely coincidental