Altman Weil recently released their “Law Firms in Transition” survey, which is now in its tenth year. The survey, which includes responses from half of US law firms with 50 or more lawyers, was initially developed as a response to the 2008 recession, to help firms understand how other firms were reacting to the marketplace and the challenges being presented. As its authors state, “We sought to provide clear, credible information that would facilitate law firm planning and operational decision making.” After a decade of change, the survey emphasizes three important concepts, which dovetail nicely with our recent discussions on the law firm of the future, and particularly the idea that the future is happening NOW.
One: Facing a New Threat
Survey authors Thomas Clay and Eric Seeger mention twice in their introduction the idea that many firms have been lulled into a “false sense of security.” When the recession of 2008 began, it was what they described as a “known threat” – it was something we’d seen before, understood how to deal with, and could be endured and managed. For those firms that made near-term changes and weathered the storm, they may feel as though they addressed the issues that their firm faced, and that they’re well-placed to meet the challenges to come. Not so fast.
According to Clay and Seeger (and really, a lot of people), the recession only accelerated a new threat –
The threat in 2018 is broader and more nuanced, arising primarily from the sweeping force of technology evolution of the last two decades that has resulted in the commoditization and commercialization of more and more legal services.”
So, unless your firm has begun to plan, or is planning, for what is more of a technological revolution (and, to be clear, this doesn’t mean that only technology is involved, just that is has a large impact that affects how your firm will use both people AND technology in its processes and services), you should start immediately.
Two: Opportunity for Differentiation is Wide Open
This is another idea that we’ve talked about ad nauseum. And that’s because it’s so, so important. In addition to needing to give your clients a reason to hire you over everyone else, the majority of firms aren’t yet truly differentiating themselves, so the field is wide open for your firm to be doing it first. I know, I know, lawyers don’t like to be first – but this is one area where you want to be in the front of the line.
Few firms have taken full advantage of the disruption as an opportunity and run with it to distinguish themselves from competitors. Being a thought leader and early adopter of new methodologies and technologies is a clear differentiator that few law firms have embraced.”
Why haven’t firms more fully embraced this? Firms are still making a lot of money – 59% of survey respondents said that they’re not feeling enough economic pain to motivate more significant change. And clients aren’t yet truly demanding it – yes, they’re bringing significantly more work in-house, and giving work to alternative service providers, but they still need and use their outside providers enough that true innovation and change hasn’t been forced. However, Altman Weil suspects that a tipping point may not be far in the future.
Three: The Time to Plan and Change is NOW
As Flaherty and Furlong said in our post on Tuesday, the future is now. Clay and Seeger agree, and the data bears that out. But, if firms are still making money, and change seems far off in the distant future, why bother to start making changes today? Clay and Seeger share three truths that light a fire under you:
- Law firms no longer operate in a closed system: Gone are the days when your only competitors were other law firms. Now you compete increasingly with in-house counsel themselves, alternative service providers, and who knows what other future player on the legal market – “There are outside players with outside money and a commercial mindset who are offering viable legal service alternatives to clients. They are established; they are growing; and they are not going away.”
- Technology is pervasive: We may think that we can keep technology at bay, but do you remember a time before you used your smartphone for everything? They haven’t even been around for very long. How about email? “New, smart technology is a pervasive force for change that extends into every facet of our lives. It is a force that is literally changing everything – at a staggering pace – and the legal market will not be immune.” I’d also encourage you to see the above point again about alternative service providers who are already confidently embracing technology to offer efficient and effective solutions to your clients.
- “Change only moves in one direction. There’s no going back.”
These are real factors that require real change. And as Casey Flaherty said, change is hard. But it’s necessary. The survey introduction echoes much of what we’ve seen in HighQ’s ebook as well when they talk about their expectations for the law firm of the future. A sustainable law firm will:
- Offer human and technology resources
- Have flexible, scalable operational processes that deliver both profitability AND client value
- Will anticipate the demands of their clients and bring innovation to them
The survey introduction offers some extremely practical tips for what you and your firm should be acting on urgently:
- Refocus your strategy externally: With everything you undertake, ask yourself if it’s going to deliver more value and efficiency for your clients. Do everything in rigorous pursuit of that goal.
- Incorporate innovation into all strategic plans: This reminds me of when we first started using social media, and people thought of it as an “add-on.” Innovation, like social media, isn’t something that you “do” separately, after you’ve accomplished your goals and projects. It has to become part of the fabric of the firm. So with every initiative you undertake, ask yourself, your team, your management committee, “how is this innovative?”
- Deal with overcapacity and under-performance: Altman Weil challenges firms to reduced their chronically underperforming lawyers by 50% over the next two years to avoid facing a drag on profitability. They suggest extending this to take a hard look at your practice areas as well as your lawyers.
- Actively manage senior lawyer transitions: This is another challenging one, but when you take a passive role in the retirement plans of your senior lawyers, you send a subtle message to the next generation of lawyers in your firm, the ones you’d like to pass the mantle to. I’d add to this that it’s equally necessary to understand how your younger lawyers need to be managed and how to help them achieve the paths that will make your firm sustainable for the future. Outside help may be needed for both of these things.
- Own what it means to be an owner in your firm: Another challenge by Altman Weil is to spell out expectations for equity partners and adhere to those – this may seem awkward and difficult because of the way law firms have traditionally operated, and because you’re asking them to buy into the firm, but it is more and more necessary to run firms like businesses. It is no longer sufficient to have someone become an equity partner simply because he or she is a good lawyer.
- Pursue real differentiation: This shouldn’t be a surprise after what we’ve discussed, and Altman Weil delves into the areas where firms can and typically do differentiate themselves. What makes sense for you and your firm? Don’t say “we’re good at everything!” because that doesn’t serve you or your clients well. Give them a compelling reason to hire you and your lawyers over other law firms and legal service providers again and again.
- Audit marketing and business development activities: One of my favorite lines in this study is “Simply increasing the volume of business development activity will not guarantee increases in billable hours and top-line income.” I hear this all the time, that from a strict numbers point of view, throwing more at something will lead to more business. Nope. “Once you have developed a client-facing strategy incorporating a definition of your differentiating value, you will have a much more compelling message to take to the market.” Work with your marketing professionals on this – it’s likely that they already know what the message should be, and are ready to deliver it when you are.
- Pick up the pace: As the survey points out, there’s a bit of a lack of urgency among firms and lawyers. As leaders, it’s our job to create that urgency. For some lawyers within firms, it will never be there. Some will already be on board, others need to be convinced, and still others are just waiting for their retirement. Leaders are tasked with supporting the early adopters and setting them up to help to tell the story.
We’ve been beating the drumbeat of change for a while now (obviously at least a decade), and what I love about this survey is that it’s backed up with data about what other firms are doing, why your firm should be engaged in change, and the opportunities that exist. As the survey introduction points out, long-term challenges demand longer planning time frames. Most firms have been focused on shorter-term plans and goals, but we must be doing more than that. Not only will it create value and efficiency for clients, but it creates huge opportunity and profitability for law firms. Yes, in the near-term, there is investment, change, uncertainty, risk, the need to get comfortable with being uncomfortable, and all that good stuff. But what we’ll build in this industry over the next ten to twenty years will be truly amazing.