A year into the pandemic, two things are clear. First, in spite of the challenges, the pandemic has not imposed a financial burden on most law firms. If anything, the opposite is true.
Second, the pandemic has created an inflection point for the world and its ultimate effect on the legal industry will be significant. The challenge for law firm leaders is simple: Do you act conservatively, to maintain your position as the world settles back to a “new normal”? Or do you take more dramatic action, and some risks, to try to improve your firm’s position?
Law has proven to be one of the more resilient of all industries, and it retains advantages that make “riding out the storm” an attractive proposition. Chances are, as long as you avoid doing anything really dumb, your firm will remain standing, and your partners will continue to be well paid. But will your market position be the same when this is over? Will you keep the same luster by sticking to your knitting, or will you find you’re a step or two further back?
There are many firms today that maintain a good reputation and are still profitable but are no larger and have no more business than they had at the turn of the millennium. Have they maintained their relative position in the industry? Not really. Standing still now while the world is changing will have an even more profound impact on the firms choosing this path.
It’s Time to Take Risks
What should leaders be doing? Take advantage of the crisis to make changes, take risks, and maybe leapfrog the competition.
Consider the following:
- Revise your strategy if yours predates the pandemic. Or develop one, quickly. Decide whether you really mean what your strategy says. If you do, take the measures needed to make it real.
- Ramp up client listening efforts, particularly in industries where your firm has significant market penetration. Make sure your lawyers understand the current and future environment key clients face.
- Narrow—and deepen—your investments. Make choices. The best firms make sure they have deep benches in the areas where they are most capable of being truly excellent. Hiring people is expensive—concentrate most of your investments on the areas where the firm is strongest.
- Stop allowing culture to stand in the way of change and accountability.
- Rethink your position on merger. Will a combination advance your strategic position and improve the value of your firm? If it will, stop worrying about “maintaining your independence” and look at opportunities to bring more talent to the table.
- Redesign services to improve the value you deliver. Consider streamlining practices with technology, project management, or both; doing things differently, including partnering with ALSP’s or building your own, and external partnerships that diversify your capabilities and improve your position with your clients.
- Examine the profitability of your practices. Empower your practice leaders to manage for profitability and make hard decisions around practices where needed.
- Rethink your future real estate strategy. Develop a long-term plan to repurpose office space.
- Rethink cultural integration and lawyer training programs to assure cultural connection and loyalty in an era of reduced in-person time.
Look at Expenditures Carefully
It may be time to cut long-term unnecessary expenses with the goal of creating investment capital to build talent and depth.
This could mean cutting staff and lawyers who no longer meet the firm’s standards, or whose functions no longer provide value; eliminating processes and procedures whose origins no one can remember; or using some portion—not all—of the savings realized during the pandemic from marketing, BD, travel, CLE, etc.
In addition, not all the pre-pandemic expenditures provided sufficient value to be reinstated. Embrace opportunities to outsource functions that can be provided better, more flexibly and/or more cost-effectively by an outside provider.
Some final considerations:
- Cannibalize your own services. Build AI and tech-assisted “do-it-your-self” solutions for clients that can be provided on a complimentary or subscription-based basis. They will come back to you when it gets complicated.
- Reevaluate your pricing approach to move more quickly away from hourly billing even while tuning rates to reflect current market conditions.
Some of these ideas might sound suspiciously similar to things we’ve long urged leadership to do. You’re right. But the environment is different now. The opportunity to do things differently may never be stronger—and the potential downside to standing still may never be greater. We urge law firm leaders to use this opportunity to make bold investments in your firm’s future.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Joseph Altonji is a founding principal and senior strategist with LawVision. He works with senior firm leadership at law firms of all types and sizes on matching their strategy to the world they find themselves in and aligning their internal structures and processes to assure strategic success.
Yvonne Nath is CEO of ALSP Advisor, a law firm strategy consultant with LawVision, and founder of LegalInnovationAggregator.com. She helps law firms navigate the world of ALSPs and she ushers all types of legal service providers into the future.