Law firm life has changed in the last two decades, and for a majority of attorneys, not for the better. The Wall Street Journal last year declared that law firm partnership was “all but dead” as a result of the shrinking number of equity partners, the widespread adoption of “non-equity partner” as a new rung on the ladder, and greater billable hour expectations. This spring, COVID-19 forced many attorneys into a “remote” or “distributed” law practice for the first time in their careers. And now the secret is out: a remote practice is better for you and your clients.
The “Death” of Big Firm Partnership
Fifty years ago, the ABA declared that “there are . . . approximately 1,300 fee-earning hours per year.” Major law firms today commonly expect associates to annually bill at least 2,000 hours. That kind of work/work balance is necessary to make equity partner, which now takes years longer than before. And, despite increasing profits, the Am Law 100 has consolidated those profits in a smaller number of partners — 20% fewer since 2000. The primary driver of that change is the introduction of the “non-equity” partner: a title with little economic benefit. At most firms, non-equity partners make less than senior associates for the first few years given capital contribution requirements, and as the name suggests, do not participate in firm profit distributions.
Fifty years ago, the ABA declared that “there are . . . approximately 1,300 fee-earning hours per year” available to a normal attorney.
The increasing billable hour requirement has a disparate impact on attorneys who have a family, and women in particular. Women first attended law school in numbers equal to men in 2001, and today represent 38% of all lawyers in private practice. But only 19% of equity partners today are women. Where did the rest go? In disproportionately higher numbers than men, they left the firm, or were limited to lower rungs on the ladder.
These changes are bad for clients as well. Attorneys expected to bill 2,000 hours a year are stretched thin, prone to mistakes, and difficult to reach. The higher salaries needed to justify those long hours get passed along to clients. And, given the exponential growth of law firms (fifty years ago, the largest was 169 attorneys; today, there are 29 law firms with more than 1,000 attorneys), attorneys are forced to hyper-specialize. The narrow expertise of big firm attorneys costs clients yet more, as it often takes multiple lawyers to screw in the proverbial lightbulb.
But probably the worst aspect of these changes, for clients and attorneys alike, is the growth of “billable waste”: fees paid to someone other than the attorney performing the work. As firm ownership decreases and firms spend more to compete with one another — on office space, perks, and associate recruiting — waste increases. Today, billable waste accounts for more than two-thirds of a typical billable hour. The upshot is a system that is increasingly miserable for attorneys, costly for clients, and beneficial to a decreasing number of (mostly male) equity partners.
The main private practice alternative is to “hang a shingle” — i.e. to leave the firm for a small or solo practice. But that approach has drawbacks as well. Although economically efficient, solo practice is professionally isolating. Plus, starting a solo practice is a headache. Attorneys accustomed to the comforts of a law firm are often loathe to tackle the logistics of starting a new business.
The Way Out — a “Distributed” Firm
In recent years, a third option has emerged. The industry has struggled to categorize this new type of firm, sometimes called “virtual,” “distributed,” or “remote.” Now that everyone is working remotely, more attorneys are seeing the attraction.
First and foremost, distributed law firms are still law firms. They provide the tools you need to practice—malpractice insurance, timekeeping software, marketing; you don’t need to start a business to start practicing at a distributed firm. Let’s face it, you went to law school to be a lawyer, not a business exec.
Even more importantly, distributed law firms give you a network. Attorneys work better in groups. The law is vast, and the permutations of fact patterns infinite. I used to tell my law students that, after a long career, they might know 2% of the law. One of the most enjoyable aspects of practicing law is the challenge of continuous learning: new facts and new laws give way to novel legal issues and questions. That’s why it’s important for attorneys to check their assumptions, try on arguments for size, and leverage the expertise of other legal professionals.
Distributed firms give attorneys more of their most valuable commodity: time.
But finally, and most importantly, distributed firms give attorneys more of their most valuable commodity: time. By radically reducing billable waste, Scale and other distributed firms pass though as much as 80% of the fees from every billable hour to the attorney who performs the work (compared to approximately 33% at traditional firms). In other words, at a distributed firm, you can work half as much and take home even more by leaving behind the fancy office space, associate recruiting, partner boondoggles, and the other trappings that you’ve now — in your forced remote practice — given up. And sure, who doesn’t like the perks? But ask yourself: would you trade half your workday — or more than double your salary — to get it back?
The secret is out. A remote practice affords attorneys more time, money, and flexibility. Before you go back, you might ask what you’re going back for.
Adam Forest is the founder and managing partner of Scale LLP. You can reach him at firstname.lastname@example.org