The current and future challenges facing law firms
Becky Mackarel, Consultant in Odgers Interim Professional Services Practice, discusses how law firms can overcome the key challenges they face now and in the future
The legal profession’s great strengths have always lain in being consistent and dependable - and offering certainty. But now the world is disrupted - and ambiguous. Unlike many other sectors, law firms have perhaps felt a glancing blow when it comes to dramatic disruption. The business model has (mostly) been remarkably resilient - and profitable. However, the future of the sector is challenged by new technology opportunities and other professional services eating into market share and meeting client needs. We have reached a point where evolution is no longer a choice. But firms are faced with a shortage of key talent and specific skillsets to bring about the kind of transformation that will ensure their position as leaders in their market - and, most importantly, meet client expectations.
A principal reason for the rising pressure to implement change in the sector is the expansion of the elite firms and the introduction of new competitors. The first-tier law firms are, however, having to contend with the Big Four who can see the prize and are looking to encroach on valuable global market share through the development of legal capabilities. They have the technology, the consultancy skills and the deep pockets to offer something different. As a result, we may see smaller firms increasingly form conglomerates that are more resilient and can expand their potential for client growth. Integrating two autonomous operations into one that runs seamlessly, incorporating people and processes from the once separate businesses, is a skillset that is growing in demand.
At the same time, clients are also seeking out law firms that can provide an expansive range of services - and are clear about the value each service provides and at what price point. For example, firms now offer additional complementary law products such as advisory HR services, personal and private wealth advisory services, alternative delivery centres, flexible resourcing models staffed up by high quality alumni and incubator units developing technology for internal and client applications.
Innovation of back-office process is another key challenge facing law firms to bring efficiency and cohesion. More attention is needed, however, to innovative pricing solutions, where change is in the “front office”, facing directly out to the client. The “time and materials” billable hour model is increasingly unpalatable and risks giving away the value add of the technology input as a “freebie”. But in a few years technology will be the product, and high touch legal advice will be reserved for “bet the ranch” issues - and how then do firms claw back their investment, which will surely only grow? And client demand for “more with less” will also only increase as they seek more agile solutions using alternative delivery models at lower cost. The law has always - rightly - prided itself on quality; beware the race to the bottom on price.
Change is also being driven by the younger cohort of lawyers. Attracting, nurturing and managing young professionals is a challenge for the sector. The firm’s culture can be a distinguishing feature; one that draws the right graduates in. However, no matter how modern or fashionable the firm, they all have a fast-paced, pressurised working environment and follow the same traditional route of career progression - to date. The conventional perception of a law firm is that managing partners and the executive community have highly traditional views and are averse to change. However, many firms have already started to shift opinion and put ideas into action with cultural change being a big-ticket item on the agenda for the future.
A number of firms are also dedicating time to implement flexible working schemes. The work of lawyers conventionally has involved extreme hours within the office, with little focus on work-life balance. The notion of unpredictable hours and the detriment on mental health is a chief concern for younger generations, making it a difficult career to sell to millennial and Gen Z talent. However, digital platforms are now supporting remote working and therefore empowering employees to have a more agile approach to their jobs - with no detriment to output.
More work in this area is needed to appeal to future trainees and retain these burgeoning leaders. Law firms need to establish a new talent strategy that is aligned to their values and - crucially - their business plan. These can be implemented by HR specialists in employee engagement, who determine and “sell” to the partnership the appropriate scope for talent development and agile working schemes.
Law firms are at a point of inflection; they are struggling to deal with the dissonance between the stringent and demanding traditional expectations of the professional services and the new, modern expectations of clients and future talent. It is clear that movement has started towards re-thinking services provided, innovating new “products”, and improving talent attraction and retention. These changes will ultimately become a priority as the sector faces an exciting era of change, innovation and evolution.
For more information please contact Becky Mackarel.