June 28, 2022
As a panelist and law firm leader remarked during the 10th Annual Sandpiper Partners’ London Legal Market Conference, the so-called “new normal” is entering a different realm. “A lot of people talk about the new normal, I think we’ve perhaps gone beyond that, and maybe we’re into the never normal. We’re into a period of constant change that’s more dynamic than we’ve seen for a long time as the global economy responds to the shocks that it has suffered.”
Clare Hart, CEO of Williams Lea, joined a panel of managing partners, law firm clients and senior leaders across the industry to discuss new practices in uncertain times. Here are the top takeaways from the event:
ESG is taking center stage for law firms and their clients
Even though cost certainty, fee arrangements and outside counsel guidelines continue to be among the top priorities for law firm clients, ESG is now a key criterion. One head of outside counsel governance at a major global investment bank revealed that it will soon be a minimum requirement for any law firm joining their panel, “We will require a third-party ESG rating from all of our law firm partners globally. I guess we’re at the forefront of doing this in the UK, but I know the US has been way ahead of us. This will be an entry-level requirement to become one of our panelists and we will set minimum ESG standards as part of our wider effort to foster more of an ESG focus in the legal industry, and a sub topic of that is diversity and inclusion as we are now marching into a war for diverse talent.”
Another client from a global pharmaceutical company reinforced the growing pressure on law firm leaders to improve their diversity and inclusion, “Diversity is incredibly important to us. So much so that we have a mini-RFP process at a matter level and 20% of the overall score is based on the diversity of (the law firm’s) team and 30% is on fees. There are more hurdles to jump through to show that commitment to diversity, but it is growing.”
The panel agreed that diverse talent is a finite resource, and closer attention is being paid to how law firms recruit and retain such talent. “How are your recruitment and retention efforts different? What are your strategies there? What are you doing to not only recruit, but to retain diverse talent?” said a client. “There are other things like flexible working that help to retain diverse talent. So, I think for law firms to articulate not only the diverse talent profile at their firm but also the initiatives and efforts that they’re making to retain that talent and improve the way that you staff are what matters.”
Staying agile must remain a key aspect of business strategy for law firms
“I think if we’ve learned anything from the pandemic, it’s the need to be able to pivot quickly. This is key to bear in mind when reassessing business strategy in challenging times,” said a panelist representing a leading multinational law firm. Agility will be required as the UK economy enters macroeconomic headwinds from multiple angles. As another panelist stated, “I think we live, as the saying goes, in interesting times, and we all know that’s a curse rather than anything else.”
After two strong years of profitable growth, the UK legal sector is entering a difficult economic environment. Interest rates are at a 13-year high, inflation is at a 40-year high, there is political instability, infrastructural disruption with rail strikes and flight cancellations, a cost-of-living crisis and the war in Ukraine. With that, significantly reduced M&A activity and a global capital market downturn is adding to a very difficult set of economic circumstances. Said one law firm leader, “There’s going to be a lot of focus, I think, for all law firms over the next four or five months on managing people, managing cost, and making sure that we don’t lose sight of the gains we had from COVID-19 in terms of flexibility and in terms of how expectations have changed, while at the same time managing our businesses extremely carefully.”
On a positive note, law firm leaders agreed that three years of constant change has built a resilience and trained them to focus on the future. That focus looks set to be on knowing where to invest and where to manage expenditure. “As leadership teams, we were properly battle hardened in some respects,” said a top UK law firm managing partner. “We’ve been consistently the same leadership team throughout COVID as we are now and therefore, in a sense dealing with uncertainty has certainly been very much part-and-parcel of what we’ve had to live with. We know the areas we need to focus on with more confidence. We look very closely, almost on a week-by-week basis in terms of how the economy is reacting and of course, making sure that we cut back, where possible, on expenditure.”
Law firms will continue to focus on talent and it’s more than just about remuneration
Following the discussions on diversity and inclusion and the war for talent, panelists voiced their confidence in maintaining a growth focus, despite the competitive labor market. Panelists unanimously agreed on a need to invest more in their people and on building a collaborative culture.
One UK law firm senior leader stressed, “We’ve done the increase in salaries, but there is a limit. We are in an invidious position where we have a declining economy, and yet we have a very tight labor market and clients will be facing further fee hikes. So, what does that mean? I think that we’ll see an increasing focus on our people’s development, how we train them, how we recover from COVID. It will be about the alignment of law firms with the values of their staff. It will be about increasing flexibility while still delivering for our clients.”
Flexible working has helped pave the way towards attracting and retaining talent. A UK partner from a global law firm highlighted the positives, “In terms of the war on talent we’ve experienced unprecedented growth. The wider acceptance of remote working has enabled us to recruit from a wider talent pool.”
However, as the need to efficiently manage expenditures grows, recruitment should focus on core areas of the firm “There is the importance of having a remuneration strategy to hold on to your talent and attract new talent and we’re certainly looking at what we’re calling our people strategy. But we are watching our discretionary spending, which will include things like recruiting ahead of non-prioritized growth areas.”
Outsourcing can bring advantages to law firm strategy, without compromise
Panelists alluded to the changing work environment bringing cost management to the top of the law firm agenda. Clare Hart, Williams Lea’s CEO, highlighted the shift in law firm leaders’ priorities to focus on legal talent which they specialize in, while working with business support providers to do the rest, “We’ve absolutely seen a shift from law firms to outsource business support services such as document processing, administrative support, proofreading to build greater compliance to outside counsel guidelines, and billing. We do a lot of that for our law firm clients so they don’t have to do it themselves and can focus on the on the client facing roles within their firms.”
Although outsourcing can save on cost, it does not mean firm culture or quality will be compromised, “We organize mentorship programs to ensure that in a world where flexibility is paramount we create an environment where people can learn.” said Clare, “The office of the future is a place as we put it for the four Cs: Collaboration, Communication, Celebration and Culture as there has to be something meaningful to bring to the office. But we still focus on things that were important pre pandemic, such as training, apprenticeship, quality of service and responsiveness.”
To learn more about measuring agile working practices and new work models, download our latest brief, Managing productivity and engagement in hybrid workforces.
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