By Tom Kane (Reprinted from Tom’s LegalMarketingBlog.com dated January 25, 2017)

More than 10 years ago, I started talking about:

• considering alternatives to the billable hour;
• questioning the future of the billable hour; and,
• in 2007, raising a question of whether the billable hour was dead?

I now know that those posts were a “touch” premature. I’m not so sure they still are. I can confidently state that the “traditional” hourly billing is dead. According to the “2017 Report on the State of the Legal Market” by Georgetown Law’s Center for the Study of the Legal Profession and Thompson’s Reuters Legal Executive Institute, in many firms, AFAs (only 15-20% of revenues) and  budget-based pricing “combined may well account for 80-90 percent of all revenues.”

The “widespread client insistence on budgets (with caps) for both transactional and litigation matters” over the past decade is the reason, according to the report. While firms may still keep track of their time on a billable hour basis, be assured that it is a different animal when it comes to invoices sent out. Debra Cassens Weiss’s take on the topic can be seen online at ABA Journal and is entitled “Billable hour pricing is effectively dead because of budget caps, report says.”

After discussing other significant changes to the legal profession over the past decade, the report concludes that “those firms that are most likely to survive and prosper in the new market environment are not necessarily the oldest or the strongest or the smartest, but rather those most able to adapt to the changes around them.” A good start would be to read the entire 17-page report.

Let’s look ahead to see what the new year holds. Here are a few ideas about what’s hot and what’s not for 2017.

Practice Areas.

According to articles and surveys by many of the top legal staffing companies in the U.S., hot practice areas include healthcare, corporate transactional law, intellectual property (particularly pertaining to entertainment law) and technology law. There continues to be a rise in cyber practices including privacy issues and data breach response. In North Carolina, real estate practices, both residential and commercial, are booming.

Legal Jobs.

At the 2016 annual meeting of the National Association of Bar Related Insurance Companies (NABRICO), several states reported the beginning of a shortage of lawyers because of retiring senior lawyers and lower law school admissions. Nationally, the unemployment rate for the employment sector that includes legal is 5.3% as reported by Special Counsel in December 2016.

In North Carolina, our over-supply of law schools and the very slow transition of senior lawyers means that it will take a little longer for us to experience a shrinking legal profession. As a result, many lawyers in North Carolina continue to experience unemployment or under-employment. We currently have more than 28,000 lawyers in North Carolina with more than a 1,000 candidates sitting for the bar exam each year.

Many experts expect to see a decline in the number of lawyers over the next ten years as more baby boomers transition out of practice coupled with the lower number of students applying to law school.

What does this mean for your firm? Strategic recruiting is important. If you have growth plans for your law firm or if you want to keep the status quo as senior lawyers retire, you need to have a growth plan in place. You should be working with the Career Services Department in our law schools, as well as connecting with legal recruiters. You should have a lawyer in your firm dedicated to strategic recruiting and they should have a list of recruiting tactics that include sponsoring events at the law school, participating in resume drops and student receptions, and offering internship or summer associate positions.

Transitioning Lawyers.

As senior lawyers begin to consider their next chapter, the idea of winding down a law practice (for a solo or small firm lawyer) or succession planning (for larger firms) becomes important. A well-developed succession plan should take a few years to work through, at least 18 months. Don’t wait until your best rainmaker announces a retirement date six months away before developing a succession plan.

As a solo lawyer, you should consider the idea that your law practice has value and there may be a market to sell your practice. Attend a “selling your law practice” program or talk with Tom Lenfestey with the Law Practice Exchange (www.thelawpracticeexchange.com) about buying or selling a law practice.

Changing Business Model.

A catchphrase for 2017 is be nimble. Adapt. Experiment with different options for your clients – a variety of ways to communicate, bill, and receive services – and see what your clients like. Many successful businesses experiment with their business model until they find what works best for them. Then they build on the model. Most law firms adopt a model that was built decades ago and they continue to operate the firm the same way, regardless of whether clients like it, employees like it, or associate attorneys like it. When the model ceases to provide results, there is no enthusiasm for building a new model.

The idea of a nimble workplace allows you to seek new ideas, collect input from your lawyers and staff and experiment with your clients. After putting an experiment in place, debrief about the process and results. Ask yourself three questions:

• What went well that we should keep doing?
• What didn’t go well that we should stop?
• What should we try next time?

Move to Digital.

This could be the year for you to move your practice to the cloud. You could also move to paperless. You don’t have to get rid of all paper or servers cold-turkey, but start the new year with scanned files, backed up to the cloud and encrypted. Move your email to the cloud with a program such as Microsoft 365 or Google Apps for Business. Joyce Brafford and Erik Mazzone at the Center for Practice Management with the North Carolina Bar Association are a great resource for technology tips, as well as referrals for technology solution providers.

There are many cloud-based practice management solutions available today. One North Carolina based success story is TrustBooks. Tom Boyle, a Raleigh CPA serving law firms, saw the need for a technology solution designed for legal. QuickBooks is a commonly used tool by small businesses, but lawyers have special needs created by the ethics rules. Tom’s solution was to build Trustbooks, a cloud-based software designed for solos and small firms and priced accordingly. Visit www.trustbooks.com for a free demo.

Importance of Data.

Managing your law firm requires you to know and use your data. Your accounting and billing software probably collects more data than you use. Use your new digital products to help you master the analytics that make your firm run. Keeping track and analyzing everything from hours on projects to costs of doing business will help you see the big picture of how healthy your law firm really is.

Artificial Intelligence.

In recent years, artificial intelligence (A.I.) has made big strides. Many Baby Boomers spent our Saturday mornings watching the Jetson’s, a science fiction cartoon family, as they lived with a household robot and zoomed around in futuristic space cars. Many of us see IBM’s Watson computer as the most common evidence of artificial intelligence, but in fact, today, we experience artificial intelligence in our smart phones, our cars and our household appliances.

Cambridge physicist Stephen Hawking called A.I. “the biggest event in human history.” Technology leaders such as Bill Gates and Elon Musk worry about a time when A.I. could become smarter than humans and whether that will cause it to become a threat rather than an opportunity.

A.I. will impact the profession for years to come not only through enhanced technology tools, but as lawyers sort the many legal issues that will arise over time.

Alternative Legal Service Providers.

While Legal Zoom might be the name we know best, Avvo has also launched their version of online legal services. There is more to say about online legal services than the scope of this article will allow, but for some insight visit Bob Ambrogi’s blog post, “Avvo CEO Says New Legal Forms Offering Will Help Steer Self-Help Consumers to Lawyers” – http://www.lawsitesblog.com/2016/04/avvo-ceo-discusses-new-legal-forms-offering.html. The post includes links to earlier posts, as well as comments by Avvo’s chief legal officer, Josh King.

The North Carolina State Bar Ethics Committee has a sub-committee studying Avvo’s online legal services and the North Carolina Bar Association has convened a task force to study the rapidly changing legal marketplace and how legal services are provided.

Many of these ideas can be discussed in more detail with Lawyers Mutual. Reach out for a strategic consulting session or to obtain practice guides and other risk management resources for succession planning, strategic recruiting and other practice management topics.

Camille Stell is the Vice President of Client Services for Lawyers Mutual. Continue this conversation by contacting Camille at camille@lawyersmutualnc.com or 800.662.8843.