Legal scholar William Henderson, of the Indiana University–Bloomington Maurer School of Law, says the future of large law firms will include changes in management, greater use of technology, and new ways to bill for services. But after decades of tremendous growth in the industry, broad changes will be hard to institute, he says. Henderson spoke recently with U.S. News about what has happened in the legal industry and what is to come. Excerpts:
How has the legal industry changed through the recession?
I see a fundamental change in what’s happening. The recession just was the window that we needed to say that the rules have changed. We’re entering an area where law firms are going to have to do something that they haven’t done for 60 years: compete for market share.
What is triggering the change?
The [corporate] general counsel, especially the more sophisticated ones higher up the food chain who—without their legal budget, lots of big law firms can’t survive—are basically dictating new rules of the road. For the first time ever, legal services are being viewed as a variable cost that needs to be controlled.
How can large firms adapt?
The ones that are going to be most successful [will] figure out how to innovate. If you want to innovate, you’ve got to dump the billable hour and figure out a long-term time horizon. You can’t innovate when you’ve got to hit this year’s numbers—or it’s difficult to do it.
What is inhibiting a move toward greater innovation?
Your most successful people are still prospering under the old model, and you need their buy-in to switch to a new model. While it’s still successful for them and will be for the next five to 10 years of their careers, the firm itself can’t rely on that rainmaker model.
What model will work going forward?
The next generation of lawyers are going to have to have different work processes, a teamwork approach, and ways to make sure the client’s getting the benefit of knowledge management efficiencies. That’s the future. That’s what happens in every other industry.
Why hasn’t it happened in law?
We’ve had so much success under this billable-hour model that we’ve been very reluctant to change. What’s the line I’ve heard here? “Nothing fails like success.” I think that describes where we’re at right now.
If firms don’t adapt, are there possible threats to business?
Law firms, because they bill by the hour, need to be worried about information service providers, like the big publishing companies in information clearinghouses. If you can sell information rather than a legal solution, you can sell that over and over again. Clients don’t want to pay by the hour for finding answers.
How can law firms benefit from using information technology?
You can’t build a robot to provide legal advice and legal conclusions to corporations, but you can use these knowledge management platforms to basically have multijurisdictional research at your fingertips. If you need [an answer] quickly, you don’t want to have an associate at $275 an hour research the issue if that legal knowledge exists somewhere.
What advice would you give to a law student?
I think the people [who] are going to be the most valuable going forward are going to understand the intersection between clients, systems engineering, information technology, and law. I think that field’s wide open. You’re going to miss it if you focus on doing high-end work.
Are we seeing any uptick in the legal industry?
Legislation in Washington is always good for business. I don’t think it’s going to be enough legislation to return to the salad days. Long-term business is growth internationally. The large U.S.-based law firms shrank in head count 6 percent domestically from 2008 to 2009, but head count actually grew abroad. Firms that have gone international are going to continue to grow.