February 03, 2023
Is 2023 likely to bring significant change in the legal industry?
This was the burning question at the 13th Annual DC Legal Market Conference, where Williams Lea CEO Clare Hart joined a prestigious panel of law firm leaders and their clients.
The pace of change for the legal industry has accelerated in the past few years, and a struggling global economy and near-constant workplace evolutions make it all but certain that the pace of change will continue. How law firms respond will help put them ahead of the curve.
Here are the top takeaways from the conference:
Downtrending industry outlook has law firms reevaluating their strategies
“There has been a shift in the macro environment that is fundamentally reshaping the demand environment,” one panelist said. This shift is pressuring law firm revenue and profitability. A recent survey conducted by FTI Consulting revealed that 57% of law firm respondents reported a decline in their firm’s net income.
Law firms are navigating this economic shift by rethinking their business strategies, particularly when it comes to spending and long-term investments. For example, some firms are reevaluating projects that may not be cash-positive in the just the first year of undertaking, a significantly shorter return on investment timeline than in the past.
The current economic climate is also increasing the willingness among law firms to explore combinations or mergers, to drive growth, expand and strengthen practice areas, as well as leverage existing client relationships. In the same survey, 20% of Managing Partners said they would explore a combination, up from 15% last summer.
Interestingly, most law firms now seem better equipped to cope with industry shifts. This new-found agile and adaptive leadership is no doubt a result of pandemic preparedness. A panelist quipped, “Change is a trend that won’t again take us by surprise.”
“Client intimacy” is key to law firm-client relationships
With an economic recession on the horizon, competition among law firms will be even tougher, and what clients consider “table stakes” aren’t going put a firm ahead of their competition.
“Everyone offers ‘table stakes’, right? You’re all from reputable firms and have a certain expertise that the clients need,” a client representative said. “You’re generally available and responsive, but that alone doesn’t make you a ‘go-to’ law firm.” [READ: More than table stakes: The value proposition challenge]
It’s client intimacy, which is goes beyond merely understanding the client’s business and the industry they’re in. It’s also about understanding the client’s leadership and how they make decisions. “There are other things going on in a company, with other stakeholders, that could affect decision-making, so try to get an appreciation of all the moving parts,” a client panelist advised.
A law firm that fully understands their clients also becomes better a problem solver and communicator. Client panelists said communication is critical in every relationship, as it allows both parties to set clear expectations. This is especially critical in billing, where “surprise” billing increases make it even harder for the client to address. One client panelist said, “If you know you’re going to need to add a certain number of associates or billable hours, that haven’t been part of the conversations, just tell your relationship partner, so the higher bills don’t come as a shock.”
A law firm panelist agreed, “It’s not that the client is always right, but the client needs to be in it, to be part of the discussion.”
In the practice of law, we are “better together”
Most law firms agreed that work culture is better cultivated when partners and associates are together in the office. Hybrid working has become a happy medium, with panelists reporting their firms are asking employees to come to the office at least three days a week.
Not surprisingly, the desire to go back to the office comes mostly from younger associates who crave in-person mentorship. “They want to be in the office, they want to learn the craft, they want to talk to people,” said a law firm panelist.
With more associates coming to work in the office, law firms now have the challenge of keeping them engaged. Some firms are doing more informal in-person partner and associate roundtables to increase collaboration, while others are creating more opportunities for associates to learn client-facing and business development skills.
One aspect of firm culture that has gained prominence in recent years is the ESG (Environmental, Social and Governance) agenda, with a hyperfocus on Diversity, Equity & Inclusion (DE&I). Law firms need to find ways to ensure traditionally underrepresented groups are getting more opportunities for apprenticeship and professional development.
Williams Lea CEO Clare Hart emphasized the role of data analytics in DE&I, particularly how it can uncover process gaps and biases. “Our ENGAGE platform enables clients to see demographic and performance data. They can see who’s making requests, what day of the week, what time, and if they’re in the diverse pool of employees, particularly female and minority classes,” she said. “For example, if an associate is always sending document processing requests on Sunday night, that may mean they’re working too much and we know that’s not sustainable, and might influence their decision to leave the firm. These are the hidden leading indicators that data can uncover, so the firm can address.”
Strong cybersecurity is more about people than technology
A hybrid workplace can be a cybersecurity nightmare with issues ranging from vulnerable networks and malware infections to insecure data access and leakage.
Law firms have been investing in cybersecurity technology to counter and prevent these risks, but top-notch tools won’t amount to much if employees don’t have the right training. According to the World Economic Forum, 95% of cybersecurity breaches can be traced to human error. [READ: Your cybersecurity is only as good as your employees]
“It’s actually about people risk,” one panelist said. “You can put all the fancy cyber protections in place, but if you have an employee who isn’t smart enough to take a cybersecurity training and clicked on a phishing email, you’re in trouble.”
Law firms should have tight controls over their systems, ensure there are no conflicts with third party vendors, and build strong information governance and breach management frameworks. It’s also equally important to train employees and get stakeholder buy-in across all levels of the firm.
As the economy struggles and legal demand falls, law firms should continue to strengthen relationships, offer more than table stakes, and provide quality service amid more disruptive shifts. They also shouldn’t lose sight of their culture, which is a critical part of any workplace equation. This is particularly true of hybrid working models, where culture can either bring people together or isolate certain groups.
Download our future of work brief, Mandate or magnetize: Finding the right approach to return to office policies and practices to learn how well-thought-out Return To Office (RTO) can revitalize firm culture and reinforce productive workstyles.
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