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Image courtesy of Scale LLP
Major law firms appear to be sticking with a long-term office space strategy even as many lawyers indicate a preference for something different. Above the Law recently reported one example of this dichotomy: despite mandating a 50% in-office policy, one Am Law 50 firm reported that 40% of its attorneys showed up less than 25% of the time. Another indicator is the continued spending on lavish leases. Paul Weiss inked the largest 20-year commercial lease of 2023 in New York worth $1.46B, and Davis Polk also expanded its footprint in the city last year to a 25-year lease for over 700,000 sq/ft, according to reporting in the New York Times.
Small wonder then that attorney billable rates keep rising. Bloomberg Law reports that despite flat demand for legal services, large law firms posted a 6% increase in revenue in 2023, fueled in large part by an 8% increase in billing rates. It would appear, then, that clients are subsidizing expensive law firm office space while the evidence suggests that a large percentage of lawyers prefer remote work. And industry data shows distributed law firms are gaining momentum as they evolve to address a broader range of needs.
Law Firms Move into a New Phase on the Remote Work Adoption Curve
The first fully remote firms came on the scene over a decade ago, emphasizing lower overhead and increased autonomy for attorneys. But while “distributed firm 1.0” identified the benefits of lower overhead and greater flexibility, early movers arguably did not preserve those features of traditional firms that lawyers value: a focus on key practice areas, the need and desire to collaborate, and the importance of brand and quality. The first and largest distributed firm recently split up – and there’s every indication some of these factors contributed to many of its attorneys seeking a different version of the distributed firm experience.
Although the adoption of remote work in the broader economy was already under way before the COVID-19 pandemic, the lockdowns of 2020-21 certainly had a dramatic and almost immediate effect on workers who had never considered a career that was not tied to a physical office location.
According to the Pew Research Center, by October 2020, just six months into the lockdown, 71% of workers with office jobs were working from home all or most of the time. Today, offices have reopened, but 60% of those workers are still remote all or most of the time. Forbes reports that 65% of workers want full-time remote work, and 57% would consider leaving their current job if their employer stopped offering a remote work option.
Similarly, remote work continues to attract members of the legal profession, with new distributed firms opening around the country. Some of the newer market entrants offer associate programs, retreats, practice groups and a culture of collaboration, while also placing greater emphasis on brand quality and values – in addition to the benefits of remote work and low overhead. So can this new “distributed firm 2.0” model attract more lawyers to reimagine their practice?
The Distributed Law Firm “Adoption Curve”
While 16% of companies operate fully remotely, almost no major law firms do. Recent developments in the distributed firm market suggest that remote work is gaining wider acceptance among lawyers, but progress is lagging compared to the broader white collar economy. One way to think of this is to describe fully distributed law firms as entering a new phase on their own “adoption curve”. So what is an adoption curve?
In the 1960s, the sociologist Everett Rogers proposed his “diffusion of innovations” theory to explain the process by which new ideas are adopted. The theory has been applied broadly since, most notably perhaps in the development of the technology adoption curve, which describes the process of adopting and accepting new tech products. The curve is built around users who define the five phases of change adoption: innovators, early adopters, early majority, late majority, and laggards.
The early law firm innovators embraced remote work primarily as a function of technology: if computers could replace the need for in-person communication and physical libraries and file rooms, law firms could simply ditch office space and provide a platform to support legal practices. Early adopters – attorneys looking for lower overhead and greater flexibility – embraced the model and were willing to overlook some of the shortcomings inherent in the early firms’ models. The first distributed firms attracted hundreds of lawyers looking to try something new.
As with technology adoption, however, early adopters of a distributed law firm model may have been too willing to accept the inherent flaws of this new solution without appreciating fully the “attorney user problems” they were trying to solve. For example, the fact remains that the practice of law is a relationship business, and is deeply collaborative; and while many lawyers bemoan long hours in the office, the strong collaborative bonds formed among colleagues are key to building successful legal teams ready to tackle clients’ toughest challenges. Cutting the overhead cost of office space has obvious attractions and benefits to lawyers and clients alike, but legal talent still values collaboration, team-building, and the prestige of practicing with other top tier professionals.
Towards a Winning Formula
More recently, firms like Scale LLP, Rimon, Outside GC, and others have evolved the distributed firm model to bridge the gap from early adoption to an early majority. This so-called distributed firm 2.0 model takes advantage of the efficiency and recruiting opportunities available to remote work firms, while retaining the benefits of traditional firms that lawyers appreciate – including associates and counsel to efficiently staff deals, a brand built around core practice area strengths, and an emphasis on collaboration and quality. Indeed, these values have been cited by groups departing the early remote work firms in search of an evolved model.
A recent ABA report entitled, “Where Does the Legal Profession Go from Here?” found that working remotely is now a top priority for attorneys, with 44% of the new generation of lawyers stating they would leave their current jobs for the ability to work remotely elsewhere.
As with any new idea, the wider adoption of remote work at law firms relies heavily on social capital: new users will always look to early adopters to point the way, and trust among users is inherent in any successful growth. With the increased emphasis on quality at newer distributed firms, the growing numbers of attorneys seeking the benefits of remote work without sacrificing quality now have sufficient options in the market to try a new model. If current trends continue, we could see the practice of law cross the chasm from early adoption to early majority. Good news for lawyers and clients alike.
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