Throughout history, societies have established systems of law to govern people. Without laws, there would be chaos, and the rights of individuals would not be protected. The legal industry has come a long way since the time of ancient Greece and Rome, where young boys learned by apprenticeship the many skills involved in pleading a law case. Today, lawyers need a great deal of training and extensive knowledge of legal matters in order to practice law.
As legal professionals position themselves to survive the peaks and troughs of an ailing economy, a number of distinct trends have emerged in the legal industry. Most of these trends help law firms and organizations become more efficient, productive and competitive in a global market. Other trends result from changing demographics, attitudes and work styles. Below are ten trends that are transforming the legal industry and law practice.
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ASSOCIATIONS & INSTITUTIONS:
You can make a difference in the world. A legal career allows you to directly impact the lives of people. For example, you could successfully defend someone who has been wrongly accused of a crime, work as a public defender to help people who can’t afford a lawyer, pursue litigation to help recover damages for clients injured by defective medicines or unsafe working conditions, or help the federal government take legal action against companies that violate environmental or antitrust laws.
Interesting work. If you like challenging and interesting work, then a law career may be for you. Most lawyers say that no two days are the same, and the wide variety of practice specialties and work environments make this profession far from boring.
Career diversity. A wide variety of career paths are available—from work at law firms, to government agencies, to corporate law and academia, to private practice. There are also many specialties such as intellectual property, tax, health, and immigration law. Law is also a great launching pad for careers in business, politics, consulting, and other sectors.
Geographic freedom. A law degree allows you to work anywhere in the United States and even the world. (Of course, if you want to work in another state, you must be admitted to the bar of that state.)
Independence. Twenty-one percent of lawyers are solo practitioners, and many find this path to be highly rewarding.
Good pay. Lawyers earned an average salary of $115,820 as of May 2015, according to the U.S. Department of Labor. This salary is much higher than the national average ($48,320) for all careers. Although they have declined in recent years, starting salaries for law school graduates are still much higher than those paid to graduates in many other majors. In 2015, law school graduates earned median starting salaries of $64,800, according to the National Association for Law Placement, up from $60,000 in 2011.
Improving outlook for women and minorities. The legal industry is a great option for women and minorities (although law firms still need to work to encourage more minorities to become lawyers and to increase the number of women and minorities in partner positions). Many firms have diversity programs and initiatives that both seek to increase the number of minorities in the legal industry and also strive to help both women and minorities advance to partner positions.
Some specialties are recession proof. Practice areas such as bankruptcy and business law will always be in demand because people, unfortunately, will always have financial problems, and businesses will always need attorneys to provide legal advice and to assist them with business transactions.
Stress and unpredictable hours. Careers in many law specialties can be demanding and stressful. Lawyers involved in litigation must spar with opposing lawyers and uncooperative witnesses. New associates often complain of being required to work long hours performing repetitive tasks. Continually putting out fires can be stressful. Last-minute motions, preparation for out-of-nowhere hearings, and hard-to-contact opposing counsel or clients can translate into a lot of late nights and anxiety. And there are always deadlines to meet—such as specific time frames within which to submit answers to interrogatories, discovery cutoffs, and impending trial dates.
Sad stories. Lawyers who specialize in criminal, elder, bankruptcy, health, and family law often must deal with heartbreaking stories of violence, financial ruin, divorce, and the struggles of people with dementia or other health challenges. It takes a thick skin to deal with these issues.
Not as glamorous as on TV. In real life, the profession is not as sexy as it is on The Good Wife or other TV shows that depict the legal industry. You’ll spend a lot of time in your office conducting research, writing legal documents, and corresponding with your clients and opposing lawyers. Not every case is exciting or high profile, but you must treat every case as important in order to properly serve your clients.
Lawyer stigma. Lawyers aren’t the most popular people with the public, and you will have to deal with your share of jokes and criticism from friends, family, and acquaintances.
Constant need for continuing education. Laws are always changing, and lawyers need to constantly update their skills and stay abreast of developments in their specialty. This can add up to a lot of extra time spent after hours staying current.
Domestic law firms are expanding across borders, collaborating with foreign counsel and forming intercontinental mergers, erasing traditional boundaries on the geographic scope of law practice. Although globalization is not new, it is gaining momentum due to the growth of the Internet, the automation of legal processes, developments in data security and emerging technology tools. As law firms continue to expand their footprint worldwide, globalization will continue to reshape the landscape of the legal industry in the coming years.
Recent amendments to the Federal Rules of Civil Procedure make electronically stored information such as e-mails, instant messages, voicemails, e-calendars, graphics and data on handheld devices discoverable in litigation. The discovery of electronically stored information (ESI) is known as electronic discovery.
The explosive growth of ESI has increased the cost and complexity of the e-discovery process and forever changed the face of large-scale, complex litigation. New roles in litigation support, e-discovery and trial technology have emerged to address the electronic realities of a digital age.
2. The Multigenerational Workforce
For the first time in the nation’s history, four generations are working side by side in the workplace: Traditionalists, Baby Boomers, Generation X and Generation Y. As attorneys, paralegals and other legal professionals work beyond retirement age, many law firms and legal departments are trying to balance a generation gap of more than 50 years between the oldest and youngest employees. Four generations working together in the same work environment present new workforce dynamics and challenges. Moreover, the pending exodus of nearly 80 million retiring Baby Boomers and the entry of Generation Z (born between 1991 and 2012) will continue to change workplace dynamics.
3. Social Networking
Social networking has the potential to transform the business and practice of law in the coming years. Legal professionals have a growing number of social media tools at their disposal to accomplish a variety of legal tasks and career objectives. Social networking is changing how legal professionals recruit, job hunt, network, locate and discredit witnesses, manage their careers and interact with clients. Social media tools such as LinkedIn, Facebook, Twitter and YouTube are also key marketing tools, helping lawyers and legal professionals reach a broad audience and accomplish branding, advertising and client development goals.
4. Legal Process Outsourcing
In recent years, the legal industry has experienced a global paradigm shift in the delivery model for legal services. This new model, known as legal process outsourcing (LPO), transfers the work of attorneys, paralegals and other legal professionals to external vendors located domestically and overseas. Legal outsourcing, both onshore and offshore, is transforming law practice as law firms and corporate legal departments seek to minimize costs, increase flexibility and expand their in-house capabilities.
5. Work-Life Balance
An ailing economy, billable hour quotas and a competitive global market for legal services have driven many law firms into overdrive. The pressure to do more with less has forced a growing number of employees to sacrifice their personal life in order to work harder and longer. As recession-related layoffs pile greater workloads upon legal professionals, workers are demanding a better work-life balance. New workplace policies such as flex-time, telecommuting, part-time work, phased retirement, temporary leave, compressed schedules and other alternative work arrangements are transforming the law firm environment from sweatshop to one of flexibility.
As going green becomes a global priority, green law initiatives are impacting the business and practice of law. In response to global warming, economic pressure and eco-conscious clients, law firms and legal professionals across the globe are establishing green initiatives that cut expenses, reduce their carbon footprint and promote social responsibility. Environmental law or "green law" is a growing practice area and many firms are establishing niche sub-practices in fair trade, organics, renewable energy, green building and climate change.
7. Virtual Law Firms
Powerful mobile devices, software-as-a service, and secure, web-based technology allow legal professionals to work from virtually anywhere. As a result, more legal professionals are working remotely from home or a virtual law office. Virtual law offices provide an alternative method of practicing law that permit flexible work hours and foster a better work/life balance for legal professionals. Virtual work is not just for lawyers – a growing number of legal professionals are working remotely. Working virtually allows legal professionals to serve their employers and clients while maintaining a better work/life balance and modifying their schedule to fit personal and family needs.
Lawyers no longer have a monopoly on the law. The legal marketplace is changing and clients can seek legal assistance from a growing number of non-lawyer professionals including paralegal technicians, legal document preparers, legal self-help sites, virtual assistants and offshore legal vendors. These new options enable help bring affordable legal services to disadvantaged populations and empower citizens to address their own legal matters. As the cost of legal services continues to rise, new legal delivery models will continue to emerge and gain momentum in the coming years.
The legal industry is expected to remain in the channel of modest growth in 2018 and beyond. This slow growth environment has created a hyper-competitive market and has extended to competition for matters, for clients and for talent. Moving beyond 2018, firms will face a number of market forces that will challenge top-line growth: price competition, the push for greater efficiency, an expanding competitive landscape and the force majeure that is technical innovation, all of which have created a new playing field for Big Law. According to the latest Altman Weil Firms in Transition survey, demand for legal services continues to weaken – demonstrating that these factors are continuing to have an impact on the industry (Law firms in transition - An Altman Weil flash survey, 2017).
Beyond traditional firm competitors, firms will continue to face competition from alternative legal service providers. While hard data is not readily available, it does appear that alternative legal service providers are growing rapidly – albeit from a very low base – and they are picking off low-value areas of legal work, thereby depressing demand growth for traditional firms. Corporate law departments continue to grow and keep more work in-house, although some view this as cyclical and likely to reverse in time, as has happened in the past. For now, we note the rapid growth of the Corporate Legal Operations Consortium (CLOC) as evidence of in-house law departments’ continued progress and drive toward efficiency (2018 Looks Like Another Year Of Blah For The Legal Industry-Another challenging year ahead for the legal industry., 2017).
Outside the U.S., increasing competition from Big Four accounting firms will also pose a big threat or the firms. With the relative size of their respective legal arms (each targeting global legal revenues of $1 billion by 2021), the Big Four have the scale to disrupt the legal services market, but they have not yet built the legal brand to compete for high-quality firm business. Their main progress appears to be in continental Europe and the Asia Pacific region, where one of the Big Four recently announced the hiring of a former large international Firm managing partner (2018 Client Advisory, Citi Private Bank & Hildebrandt Consulting LLC, 2017). While the brunt of this disruption is occurring overseas, where these firms are allowed to practice law, they are starting to make waves in the U.S. market too. Most notable among these is PwC’s recent announcement that it would launch a firm called ILC Legal in Washington, D.C., which won’t offer law advice, but will assist U.S. clients on international issues and help refer work to PwC’s legal services network worldwide (PwC to Launch US Law Firm as Big Four Expand Legal Offerings, 2017).
As legal services continue to move the commoditization route, the Big Four have been quick to move in on matters traditionally serviced by firms, including due diligence, regulatory and compliance services and tax, among others. The Big Four make up a significant portion of the alternative service provider market mentioned above, and should not be disregarded as a threat simply because of current regulation that prohibits them from practicing law. As the legal services market changes and continues to be more segmented, the Big Four are proving that they’re not waiting on the sidelines to pick up work – and client relationships – at a swift pace.
The sheer depth and reach of the Big Four makes them potentially formidable competitors. The three largest of them combined have global revenues that exceed the aggregate revenues of the Global 100. They spend more on technology and training each year than the revenue of any firm. They are very experienced at developing multi-point client relationships and solutions to clients’ business issues (2018 Client Advisory, Citi Private Bank & Hildebrandt Consulting LLC, 2017).
Apart from the Big Four, other alternative legal service providers (commonly referred to ALSPs or NewLaw) have also been gaining market share, providing clients with a wealth of options to receive their services from. According to a report on ALSPs issued jointly by Thomson Reuters Legal Executive Institute, Georgetown University Law Center, and the Oxford Säid Business School in February 2017, the global ALSP market is substantial, with a market of approximately $8.4 billion annually (Alternative Legal Service 5 Providers - Understanding the Growth and Benefits of These New Legal Providers, 2017). The report also indicated that their revenue may seem modest compared to $275 billion total revenue of U.S. law firms or the estimated $700 billion total global legal spending, but this rapid expansion occurred in only a few years and more is yet to follow.
Pressure to reign in legal costs have forced law firms to diverge from the traditional billable-hours model - a century-old staple of the legal industry that has been criticized for rewarding inefficiency - in favor of new alternative billing models such as fixed, flat, blended or capped fees. In fact, a new law department metrics survey reports that 72.8 percent of fees paid to outside counsel in 2009 were based on billing arrangements other than standard hourly rates or the billable hour. In order to foster long-term relationships and maximize value, more law firms are embracing alternative billing as a way to meet the needs of cost-conscious clients.
Citi’s 2018 Client Advisory found that fewer than 29 percent of firms saw two years of consecutive demand growth for the period that ended in September 2017, down significantly from 64 percent of firms from 2005 to 2007 (2018 Client Advisory, Citi Private Bank & Hildebrandt Consulting LLC, 2017). In 2018, the slow-growth environment isn’t expected to abate.
Partner-equity growth is projected to be muted at around mid-single digit growth for the year, and this slow growth won’t be the only challenge Citi sees firms facing throughout the year. An aging workforce, a growing competitive landscape and increasing operational expenses will continue to create new challenges for firms (2018 Client Advisory, Citi Private Bank & Hildebrandt Consulting LLC, 2017). In a review of 2017’s first nine months of revenue and expenses from 183 firms (70 percent Am Law 200 and 30 percent boutiques), Citi found that expenses were actually eclipsing revenues (Showing Better 2017 Financial Results Just Got a Little Tougher, 2017).
Citi suggests firms that have experienced revenue growth in 2017 may not be able to achieve the same in 2018 (2018 Client Advisory, Citi Private Bank & Hildebrandt Consulting LLC, 2017), largely because the gap between the most profitable firms and the remainder of the Am Law 200 continues to grow – and one firm’s growth can be at the detriment of another’s (Amid Law Firm Merger Boom, 'Transformational' Talks on the Rise, 2017). Another financial challenge is the rise of associate salaries and bonuses, with which some firms are struggling to keep pace. It’s expected that those firms in the less-profitable echelon of the legal industry may need to hold off on high associate bonuses after years of trying to follow in the footprint of Big Law, which further highlights the growing disparity in firm profitability and the related consequences of this divide.
An offshoot of this growing profitability gap among the Am Law 200 has been a bout of firm mergers. In 2017, through mid-December, there were 96 firm combinations, (Altman Weil MergerLine, 2017). This breaks the previous record for most mergers in one year, which was 91 in 2015. Among 2017’s mergers, 17 involved a firm with more than 1,200 lawyers. This signals that many mergers involve small- and medium-sized firms that are attempting to grow. Big firms are also eating up smaller firms more frequently as they look to close gaps in their coverage areas (Law Firm Mergers On Record Breaking Pace in 2017, 2017). Separately, recognizing the hypercompetitive legal services market for the Fortune 50 companies, many Am Law 200 firms are starting to move down the ladder, recognizing the vast opportunity that resides within the middle market client base (Middle Market Proves Top Prospect for Many Am Law Firms, 2018). The following table looks at some of the leading opportunities for legal services growth in 2018, and those areas that could experience challenges.