When asked to give examples of new business models of legal practice in the US, Axiom is likely to be near the top of anyone’s list. But how long is the list–how big is NewLaw? A recent paper exploring that question suggests the answer is, not very long, but long enough to take note.
The paper summarizes research by Hastings Law School Professor and WorkLife Law Center Director Joan Williams with Center Fellow Jessica Lee and Berkeley Sociology PhD student Aaron Platt. They describe the project as
the first attempt at a comprehensive review of a wide variety of new business organizations that have arisen in recent years to remedy the market’s failure to deliver business organizations responsive to the complaints of either lawyers or of clients.
The “New Models of Legal Practice” described here typically offer a new value proposition for lawyers and clients. For lawyers, New Models offer better work-life balance and more control over other aspects of their work lives—in exchange for which lawyers typically (though not invariably) shoulder more risk, giving up a guaranteed salary, to be paid instead only for the hours they work. For clients, New Models typically drive down legal fees by sharply diminishing overhead through elimination of expensive real estate and the high cost of training new lawyers, and (again) dispensing with guaranteed salaries.
They break the New Models universe into five categories:
1) Secondment Firms place lawyers in house, typically to work at a client site either on a temporary basis or part-time (typically a few days a week). Some consist exclusively of senior lawyers who can function either as general counsel or as regional heads of legal departments in very large companies, while others place more junior lawyers to help with overflow work from in-house departments.
2) Law & Business Advice Companies combine legal advice with general business advice of the type traditionally provided by management consulting firms, and/or help clients with investment banking as well as legal needs.
3) Law Firm Accordion Companies assemble networks of curated lawyers available to enable law firms to accordion up to meet short-term staffing needs. Typically these networks are women lawyers who work short part-time hours (10-20 hours a week.) Attorneys are paid only for the hours they work.
4) Virtual Law Firms and Companies typically drive down overhead by having attorneys work from their own homes—and again dispense with a guaranteed salary, allowing attorneys to work as little or as much as they wish. These organizations vary a lot: some are very similar to traditional law firms, while others are companies in which many of the functions traditionally performed by lawyers, notably rainmaking, are the province of the company owners.
5) Innovative Law Firms and Companies include the widest variety of different business models. The single most innovative is a company with a new monetization model—providing legal services in return for a monthly subscription fee—which allows attorneys to work in a sophisticated legal practice on an 8:30 a.m. – 5:30 p.m. schedule, little or no weekend work, and three weeks’ unplugged vacation per year. Other innovative law firms change key elements of the traditional law firm model in ways that allow for better work-life balance and also have one or more of the following elements: alternative fee arrangements, team scheduling, elimination of the partner/associate distinction and “rainmaking” requirements.
After scouring the industry for these new models, the authors found only eight Secondment Firms, two Law & Business firms, five Law Firm Accordion Companies, eleven Virtual Law Firms, and eighteen Innovative Law Firms. That’s 44 total entities out there providing legal talent under a business model substantially different from the traditional law firm model. As the authors’ detailed summaries of each model reveal, some of these operations are quite large, like Axiom, and some are small.
So what’s the take home message? On the one hand, it’s unlikely that the Am Law 100, with combined revenues in 2014 of over $80 billion, are looking over their shoulders in fear of the NewLaw disruption. On the other hand, that’s 44 more entities in the NewLaw space than existed a decade ago. Also bear in mind that the lawyers in these entities are truly practicing law, or close to it (Axiom insists in tiny print it is not a law practice) rather than operating exclusively as consultancies, outsourcing firms, or online legal document providers (all of which are growing sectors of the legal industry as well). Given the practice model constraints imposed by US bar regulation, it’s impressive to see this many entities pushing the envelope. How far this trend can go without UK-like regulatory acceptance of alternative law practice business models remains to be seen, by my guess is that the drivers that led to these 44 firms forging the NewLaw universe are not going away, ever, which suggests the number will continue to grow regardless.
With respect, I suggest your opening question on the number and size of NewLaw enterprises in the U.S. Is the wrong one. Because of regulatory restriction and cultural aversion (both for now), the U.S. lags, especially the U.K. And Australia.
Readers may wish to review our work on a BigLaw-NewLaw taxonomy and the examples we cite to better appreciate the breadth and depth of the alternatives to the conventional business model that are rapidly emerging: http://www.beatoncapital.com/2015/01/fresh-thinking-evolving-biglaw-newlaw-continuum/.