Remember Martin Short’s wedding planner character in the remake of ‘Father of the Bride’? If so, you will recall his memorable ‘Welcome to the ‘90’s, Mr. Banks’ retort to Steve Martin (father of the bride) who could not stomach a $1,200 wedding cake. Its a couple decades later and excess has yielded to ‘better, faster, cheaper.’ But the Short line resonates because most of us are having difficulty swallowing the breathtakingly broad, rapid changes occurring in the workplace and in life generally. We are—as T.S. Eliot said of the magi–‘no longer at ease in the old dispensation.’
Deloitte’s 2016 Global Human Capital Trends report shines a light on the mega-trends that are recasting corporate structures and transforming the way people live and work. The report is based on more than 7,000 responses taken from executives in over 130 countries around the world. It concludes, based upon the response from 92% of executives surveyed, that there is a need to redesign the organization (business structure)—and to build a ‘new organization.’ Translation: traditional business structures no longer cut it. This is pretty radical stuff, but it does help to account for the accelerated pace of change sweeping across virtually all industries.
What Is Deloitte’s Vision Of The ‘New Organization?’
Deloitte identifies several core elements of the ‘new organization’: highly empowered teams; a new model of management, and a younger, more globally diverse leadership. They also describe a ‘shared culture’ that engages people , creates a new model of leadership and career development, and promotes a “strong learning culture.” If this is beginning to sound like a structural reboot, it does to me, too. Why is this happening and what’s driving it?
The Deloitte study identifies the convergence of four key factors: (1) demographic upheavals that have made the workforce more diverse (Millennials now comprise more than half the workforce); (2) the ubiquity of digital technology; (3) the accelerated rate of change; and (4) a new social contract between companies and workers that is recasting the employer-employee relationship (a more peripatetic and agile workforce).
What Does This Mean For The Legal Industry?
Signs of the ‘new organization’ already abound in the legal marketplace. Until two decades ago, law firms had a virtual monopoly over the delivery of legal services. They controlled access to legal sources–unlike today, the public could not readily access legal sources and relied upon law firms to do so– as well as legal expertise. During the past two decades—and especially since the financial collapse of 2008—that has changed. Digital technology and globalization spawned ‘disaggregation’—peeling away tasks formerly performed by law firms. Technology also kick-started the ‘agile workforce’—the first cousin of ‘the sharing economy’—and it seems to square well with Millennials. And while the ABA and State Bars have stubbornly sought to preserve the status quo by regulatory paralysis, their failure to re-regulate will not stanch the sweeping global, cross-vertical changes now buffeting the legal industry. Bottom line: the changes are too powerful and pervasive for lawyers to obstruct by self-regulation. It’s time that legal regulators and lawyers acknowledge this and respond accordingly. Failure to do so might result in marginalization.
This Is Why Law Is Experiencing a ‘New Normal’
During the financial crisis and its immediate aftermath, many legal pundits—as well as GC’s and law firm managing partners—questioned whether the changes they witnessed were temporary or permanent. The results are in: to quote Steely Dan, “Those days are gone forever, over a long time ago, oh yeah.” Now the discussion is focused on where things are headed. My take: Deloitte’s report provides a blueprint that is already playing out in the marketplace. Consider that the law firm herd is already thinning and buyers are altering longstanding purchasing patterns in no small measure because law firm delivery structures and the traditional partnership model are no longer aligned with marketplace needs or expectations. Translation: legal buyers are challenging the traditional law firm models and finding options.
The traditional law firm model is a pyramid with equity partners sitting atop a well-paid but politically impotent team of subordinates. Succession was assured so long as younger talent had a reasonable shot at one day grasping the golden reins of power (e.g. partaking of profit-per-partner. That’s gone. So too is the ability to create a ‘new organization’ unlikely at most firms. Why? Because there is an economic misalignment/ generational divide between older partners seeking to ‘run the table’ and younger partners with a financial incentive to build for the future. Deloitte summed up the dynamic: ‘ The traditional pyramid-shaped leadership development model is simply not producing leaders fast enough to keep up with the demands of business and the pace of change.’ Legal providers—and that includes in-house legal teams—would be wise to consider an inter-generational leadership model if for no other reason than legal delivery now involves legal expertise as well as IT and process expertise. The latter skillsets are new to the vast majority of lawyers.
The inability—failure—of law firms to create ‘new organizations’ helps to explain the explosive growth of in-house legal departments as well as their rapid transition from legal consumers to legal providers. During the past three years, global demand for legal services has risen steadily. Demand for law firms has been flat during that period. How to explain the delta? In-house legal departments now account for approximately 40% of legal spend. And legal service providers—with different management structures, agile workforces, and many of the ‘new organization’ characteristics—are also garnering a rapidly increasing market share. They are beginning to create ‘new organizations’ in the absence of law firms doing so.
Its lawyers’ hubris to think that law is ‘special’ and immune from powerful global changes affecting so many other professions and industries. Lawyers might consider changes in medical delivery as a portent of where things are headed. Or they might reflect upon how they purchase goods online, read digital books and newspapers, use Uber, AirBnb, etc. Those industries—and many others—have new structures that have replaced incumbent ones. Why should legal delivery be any different?
Lawyers are not confronting extinction. But the incumbent legal delivery model—excepting a handful of differentiated firms performing truly ‘bespoke’ matters- –is experiencing an existential crisis. There is peril for those unwilling to change and opportunity for thoughtful ‘new organizations.’