In the current economic crisis, law firm management must re-think how lawyers practice and how to run the firm. 

The legal market changes slowly. Many say the slow pace stems from lawyers’ training to focus on precedent. That’s true but I think the bigger reason is that the market has rarely punished late adopters. Law firms could afford not to change because they consistently earned high profits.

Late adopters in other industries, in contrast, are regularly punished. For example, Sony’s focus on cathode ray tube televisions while competitors developed flat screen technology cost it dearly. Or look at the US auto industry. Law firms, however, rarely suffer by being late to the game. The ones that waited to adopt e-mail, waited to create marketing departments, skipped knowledge management, or waited to take business intelligence / analysis seriously have not visibly suffered.

That may change in the current economic crisis. Three AmLaw 100 firms have dissolved and many have laid off lawyers and staff. Articles today report on pressure to drop rates and BigLaw partners decamping to smaller firms where they can charge less.

Is the market just in a downturn or has it fundamentally changed? Blogger and editor Jordan Furlong argues in This is not a drill that

“Many underlying beliefs about how economic value is generated are simply falling away, and we don’t yet know what will replace them — all we know is that it’ll be different from what we had before. That’s why many of the legal job losses we’re seeing, in firms of all sizes, aren’t temporary layoffs that will return when the recession ends. They’re eliminations — positions that won’t come back, because the underlying mechanics of value in legal services are changing and the new environment that emerges from this crisis won’t require them.”

His blog post cites many recent articles and blog posts supporting this proposition (including Recession Sends Lawyers Home from the Washington Post, in which I am quoted).

The question for large law firms is how to react to this downturn beyond immediate lay-offs and cost cutting. Should they deploy more technology? Work virtually? Move to fixed fee billing? Put project managers in charge of big matters? Centralize management? Get serious about practice group profitability and management? Outsource more?

I would argue for all these changes and more. Yet some of my BigLaw friends think that all will return to normal in a couple of years. What if they are not right? What if the market really has changed? What if firms late to adopt new ways of working and doing business are punished?

Smart managing partners should explore options to reduce the risk of being left behind (and perhaps going out of business). Also, exploring options with clients builds their trust and can gain share. Just offering clients a new approach – even if declined – tells clients that the firm is looking out for their interests.

[I originally posted this at Integreon’s blog.]