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Lawyers must embrace change to remain relevant

Opinion

Diversity, technology and the pressure to do ‘more for less’ are resulting in rapid changes in the Australian legal profession, writes Morry Bailes. So is it a good thing?

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When one holds up a mirror to the Australian legal profession now, it makes for interesting reflection.

The NSW Law Society surveys the profession annually, and other law societies are following suit, because it tells us what is happening within the profession and why.  A number of distinct trends have emerged.

The first has been with us for some time. It is the growth of the large firm or, rather, the dividing of the profession between big and small.

A big firm has no true definition, but we are talking of large national, often international outfits which are more like a listed company than your traditional high-street law firm. Clients include nation states and governments and large listed companies. They have a depth of speciality not often seen elsewhere, handling, among other things, complex commercial issues and large litigation.

For a time, one end of the legal market place grew while the other stayed the same. However, things changed with the advent of the global financial crisis – clients become more aware of cost.

As Oxford University’s Professor Richard Susskind put it, corporate clients wanted “more for less”. The impact on large firms was noticeable. The trends started to morph. “More for less” drove an embracing of new technologies to achieve efficiencies, but also opened a door for the smaller, medium-sized firm to fill the gap.

Many such medium-sized firms began to specialise in a particular facet of law – intellectual property, for instance – and having often spun out of the big firms, they started to diversify their offering to compete on cost. The trend continues, with a view from many that continued technological development will only accelerate smaller firms’ ability to compete with their larger compatriots.

The big firm response has been, in part, to become even bigger. There have been many notable mergers, the latest being yesterday’s announcement that global firm Norton Rose will merge with Australian business Henry Davis York.

So consolidation is one response from the big firms, and it is likely to continue.

There are also more firms at other end of the market, which I think of as a legal cottage industry. Small firms are not necessarily growing – nor, in many cases, do they want to – but are adding to an increasingly diversified industry. They are divided between firms that largely ignore technology and those who are tech-savvy and doing their own thing.

There will be winners and losers here. Succession is often difficult for smaller firms, particularly if they have stood still for too long, so they may shrink and die. Others remain competitive, of high quality, and are here to stay, particularly as they service “middle” Australia, where there is a continued strong demand for services.

So notwithstanding the emergence of competitive medium-sized firms, the landscape remains divided between big and small. This division will not close any time soon.

The second trend is the rise of the in-house lawyer.

Corporations have traditionally had in-house counsel to advise broadly on matters and help select external lawyers for specialist jobs, but that is changing. In-house teams are growing. They are gaining internal specialities while still giving out work when needed.

In the US, in-house lawyers are assisted with artificial intelligence algorithms to predict case outcomes that go some way to determine whether external lawyers will be briefed at all. This trend will undoubtedly reach our shores, if it hasn’t already.

Despite being a model that does not always deliver the best savings, the growth of in-house lawyers continues, perhaps as a response to the “more for less” challenge. In-house corporate lawyers now represent about 30 per cent of solicitors. If government in-house is included, the figure could be closer to 40 per cent.

The third trend relates to barristers. In jurisdictions where the professions are divided, and in more traditional times, it was always the case that solicitors would brief barristers. As competition has increased and big firms have grown, there has been a trend toward keeping traditional counsel work within the firm longer – briefing later or doing the job internally.

In states such as South Australia, the profession is undivided – one is admitted to practise as both solicitor and barrister – so this trend is less at play and, if anything, is the reverse as the Bar has grown.

Somewhere within this matrix sit the lawyers of the future

When I was first admitted, I often did my own counsel work and it was encouraged. However, our domestic bar has blossomed and with it the inclination to brief a barrister externally, rather than conduct aspects of counsel work yourself. Not so in jurisdictions where the bars have always existed and barristers have their own profession. Reports from those jurisdictions show some of the barristers’ work is being cannibalised by much larger firms.

It is not necessarily a good thing. Barristers at the bar bring independence which can serve a client well if there is to be a critical analysis of the conduct of a case. They can also be cheaper, given firm overheads. Nonetheless, the trend of conducting more matters within the firm continues.

There are other trends to note: male and female participation is roughly equal but not necessarily in full-time positions, nor at the Bars. The relative age of the profession is increasing in some jurisdictions – possibly due to people living longer and tougher economic times resulting in older lawyers “hanging on”. Frankly, this is a good thing. Experience counts – but it is not always great for law graduates. Nor is it a universal trend.

It is also clear only a minority of lawyers work in big firms. They are dramatically outweighed by the sole practitioner and small firms.

From all of this we can say the legal profession is diverse in configuration of practice and in what we do: from the regional lawyer who concentrates on conveyancing and estate planning, to the gargantuan legal entities that straddle the globe enacting huge commercial deals.

It is important legislators understand this, because when it comes to regulating the profession, a one-size-fits-all approach cannot work. It is also relevant to educators, who are preparing graduates for what are potentially very different careers in the law. And it is a lesson for professional associations representing lawyers that there are many facets of the profession –  some, frankly, unrelated to others.

Lawyers, thus, cannot be all tipped into the same bucket, especially as technology-assisted legal practices spear off in many different directions. Somewhere within this matrix sit the lawyers of the future.

For some, traditional practice – due to demand or practice area –  will remain, but there is enough diversity to mean some lawyers of the future will not look and feel like what we have seen in the past. The law will undoubtedly be better for it.

For the foreseeable future, big firms will continue to be tested by the demands of “more for less”, and be pressed by smaller outfits, which will drive consolidation.

Innovation, irrespective of firm size, remains key. Barristers will need to embrace change to remain relevant, faced with both the value test as well as bigger firms cutting some aspects of their lunch.

As to some within the law who think little will change, the demographics put the lie to that. Diversity and social inclusion is altering the face of our profession, as is client demand and technology. I wonder if we will recognise ourselves in the mirror 20 years from now.

Morry Bailes is the managing partner at Tindall Gask Bentley Lawyers, president-elect of the Law Council of Australia and is a past president of the Law Society of SA. The opinions expressed in this column are his own.

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