In his recent New York Times Op Ed piece, Thomas Friedman described the COVID-19 outbreak by stating, “the last few weeks were actually pretty unsurprising and predictable in how the pandemic spread. But we’ve now reached a point where all our interlocking systems, each with their own feedback loops, are all shutting down in unpredictable ways. This will inevitably lead to some random and chaotic consequences…”
The COVID-19 outbreak has two main ways of disrupting a business. First, it may directly impact a business’ productivity or capacity. In the context of COVID-19, this takes the form of direct expenditures related to employee health, or a reduction of the amount of business they do because the nature of the business puts people in close physical proximity (e.g. a commercial airline underfilling or cancelling a flight to stop a vector of infection). The legal industry has really faced only two direct effects from the outbreak: court closures (as courts are public spaces that can act as infection vectors) and work-from home.
As the legal industry’s client base suffers under the direct impact of the outbreak, expect to see fewer cases in practice areas such as M&A (as companies won’t want to expand in a struggling economy), and more delinquent or tardy payables overall (as companies will experience shortages of liquid cash). Reputation and perception are factors as well: even when work exists and the client can afford to pay for it, longer term financial concerns may result in those clients having higher standards regarding how “important” a case has to be before it’s “worth” hiring outside counsel. Given the fact that an individual attorney can do from home most of what they can do in the office, the direct effect of the outbreak on the legal industry is fairly muted. It’s the indirect effects, the unpredictable interactions with other industries, that pose the greatest threat to the legal industry.
In light of that, it is concerning how little commentators can agree on what secondary effects we are currently experiencing, let alone trying to predict the future. Some articles and editorials report an increased demand for attorneys from the outbreak, while others report attorneys getting laid off as a response from the outbreak. None of these articles aren’t necessarily wrong but are looking at different sectors of the industry and making a different set of assumptions. But the disparity should serve as a reality check of how little we attorneys actually know about the outbreak and its present and future effects on our industry. Given how insulated we are, its hard to tell how bad it is out there from the comfort of our home offices, and its even harder to figure out what we should do.
A common theme in the more optimistic op-eds is that that the legal industry survived the Great Recession in 2008, thus it can survive this one doing more or less the same thing. Since we are insulated from the direct effects of the outbreak, it’s easy to say “So clients think we overcharge and want a better value. That was true in 2008 too, how is this different?” This conclusion is naïve, as it is clear that the measures that allowed large law firms to survive the financial crisis of 2008 will not be effective this time around.
The legal industry has employed 2 primary strategies in the past to survive: raising fees and downsizing. Raising fees will not work: We’re still living under the “new normal” with regard to client expectations regarding pricing and value. Clients having generally higher standards regarding how “important” a case has to be before it’s “worth” hiring outside counsel. Many corporate clients have even created a new position, legal procurement, who is a non-lawyer tasked with shopping around and comparing prices for legal services.[i] Moreover, Alternative Legal Service Providers have become normalized since the last recession. Clients are more comfortable offloading legal work to non-lawyers and as a result, lawyers face more competition. Layoffs and downsizing won’t work this time either: Those solutions are exhaustible, and the expenses and lawyer/partner headcounts haven’t come close to their peaks in 2007.[ii] Law firms can’t rely on cuts in those areas to maintain profitability again because there is simply less available to cut. With the coronavirus outbreak ongoing, we can expect these trends to intensify (less client tolerance towards raised fees, not enough people still on the job to fire). All of this illustrates the danger of making these sorts of comparisons uncritically, and without the proper historical context: even if two events resemble each other superficially, the world was a different place and the circumstances of the businesses and individuals within it has changed.
So, what should the legal industry be doing in response to the COVID-19 outbreak? Contending with the direct impact should be relatively straightforward, as it mainly involves maintaining communication and productivity in a work-from-home environment. Work from home is nothing new to white-collar professionals, including attorneys. Indeed, 69% of business organizations participating in a 2019 study by the Society for Human Resource Management say they allow employees at least some work from home.[iii] However, firms who want to stay ahead of the curve and differentiate themselves from their competitors can take proactive steps to make sure they get the most out of their work-from-home employees. In particular, law firms need to make sure the technology they are using to facilitate work-from-home are robust and up to date and that their employees know how to use that technology. This obviously includes collaboration and communication tools, such as teleconference software, cloud storage etc. But this also includes informational security necessary to keep your client’s data secure.
Workflow automation also plays a key role in maximizing work-from-home productivity. Before the outbreak, automation was valued primarily as a means of getting more work done. However, automation can also mitigate one of the primary challenges with working from home: distraction. Distraction, like boredom, tends to strike during repetitive, unengaging tasks like copying and pasting, exactly the sort of the work that automation is suited towards. These tasks also tend to require little expertise. By eliminating these repetitive unengaging tasks, the work-from-home attorney produces more value for their employer per hour worked. The important thing for partners and managers to understand is that these are not just COVID-19 measures, but rather digital best practices that will continue to pay dividends even after the outbreak passes and nation returns to work. By treating work-from-home not as a temporary measure in response to a particular crisis, but as part of a broader trend, a law firm can land after the outbreak with a workforce that is able to comfortably and securely telecommute, use the cloud, and keep their data secure.
With relatively minor direct effects to worry about, the primary measure of a law firm’s COVID-19 readiness will be their ability to handle the secondary effects, and accommodate the difficult position their client industries are in. Building consumer confidence through innovation and proactive measures provide more value for less money. We face a new economic crisis when the last one was in recent memory. Any business that appears to be wasteful or resist innovation will suffer a serious loss of reputation: the customer will ask “what are you doing in response to the paradigm-shifting global crisis?” and they will not be satisfied if you answer “our accountants say we’ll probably be fine. Instead they want to see innovation, digital innovation, a field where the legal industry has historically lagged behind.[iv]
It’s hard to know what the legal industry, indeed the world as a whole, will look like after the dust from COVID-19 settles. But it’s hard to imagine a post-COVID-19 world that tolerates law firms that rely on austerity and resistance to change as opposed to flexibility and modernization.
[i]Buying Legal Council, a trade organization for the nascent legal procurement profession, was founded in 2013. See also Deb Tesser, “Legal Procurement 101, An Interview with Dr. Silvia Hodges Silverstein” Evolve the Law: ATL’s Legal Innovation Center, Sept. 13, 2018, and Deb Tesser, “Is Legal Procurement the Disruptor We’ve been Waiting For?” Evolve the Law: ATL’s Legal Innovation Center, Sept. 18, 2018.
[ii] Thomson Reuters Legal Executive Institute and Georgetown University Law Center, 2018 Report on the State of the Legal Market, 2018 (the “2018 Market Report”), at 13-14.