Four ‘essentials’ for law firm leaders in 2021
We don’t need to wait for a ‘post Covid-19’ environment (if such a thing will ever exist) to know that the legal market has irrevocably changed. Law firm leaders have been sailing unchartered waters for some months now. It is anyone’s guess whether this will continue for weeks, months or even years. Whatever lies ahead, success in 2021 involves learning from the turbulence of the past several months.
No matter their shape, size or structure, all law firms must consider the following four ‘essentials’:
1. Be cautious about cash.
Anecdotally, many law firms have experienced positive results during the Covid-19 crisis. Hannah Wootton (Aust. Fin. Review) recently reported that almost 80 per cent of Australia’s corporate law firms have recorded stable or rising profits compared to the previous year. This typically results in stronger than expected cash positions. Will this trend continue? It might for those who are smart about their management in 2021. It may not for many others.
The fact is no one knows what the economy will look like in a year. With an unemployment rate that is on the incline and government stimulus support reducing, business remains cautious. Law firm leaders should also remain cautious about their management of cash. Forecasting is essential.
2021 will see continued pressure on pricing of legal services. For those who service larger corporate clients a likely increase in the involvement of procurement and managers of legal spend. Law firms must offer pricing options for their clients which guarantee certainty.
Due to the unbalanced economic environment and ever-increasing client pressures, many law firms are likely to find increased pressure around collections, write-downs and write-offs. Ensuring business intelligence systems are producing dependable data, and that the resulting data is appropriately considered and actioned is vital. Now is the time for all law firm leaders to be meticulous about monitoring financial metrics that impact cash.
2. Working from home will be permanent (in some form).
For as long as I can remember there was resistance by some law firm leaders in allowing staff to work from home, or to implement more flexible working arrangements: “If I can’t see them, how do I know they are working? How do I trust them to do their jobs? Productivity will surely be down…”
When the Covid-19 crisis commenced almost every law firm was forced into very quickly getting systems and structures in place for staff to work from home. Those perceived issues of resistance to working from home and more flexible working practices that have been recycling for years were effectively flushed out overnight. This is one of the very few good things to come out of the Covid-19 situation.
What has transpired now is that many law firms still have staff working from home. It has been near enough to ten months and, as discussed above, many law firms have had very positive results during the Covid-19 crisis. Productivity did not drop!
When the country properly opens up, we will see a surge of people returning to the office. After all, for some it has been months and months of isolation. However, that surge is also likely to lessen over time. There have been countless surveys results reported in legal media, and more broadly within professional services, that working from home, in some form, will become the norm. At least there is an expectation of this. Lawyers want, and are entitled to, a true work life balance.
What does it look like? Most law firms will find a middle ground that suits the needs of both them and their staff. I doubt many law firms will go to a 100% virtual environment. There is still a need for lawyers and staff to attend the office. Fulfilling learning and social needs are two key reasons in addition to still needing some client ‘face-to-face’. There are many other reasons.
With greater workplace flexibility comes the need to rethink the office footprint. After all, it is one of the largest expense lines for any law firm. However, rather than rethink office footprint, law firm leaders need to take this a step further and reimagine the office, its purpose, and how it will be used. In the future what is the best work mix to undertake from home and then from the office?
Law firms should not return to a pre Covid-19 model where working from home and/or flexible working arrangements was the exception not the rule. It must be a part of each firm’s strategy in 2021.
3. Digitalisation and process improvement, now.
For those law firms which had already properly invested in, and managed technology, the process of effectively moving overnight into a virtual environment was not particularly complicated. For others, the leap was far more challenging. It really shouldn’t have been.
Many firms pre Covid-19 had documentation digitally stored in the cloud and as such the transition to working from home was much easier. I have heard stories about some firms having hard copies of files transported from office to home. If your firm is still doing this, it is time to move with the times (which are moving rapidly!).
There are so many options for law firms that will make the firm run more efficiently and the working life of your staff easier. It may be tools as simple as digital signing, smart contracts or digital booking systems. Ensuring video conferencing facilities are steadfast (at least) is a must. We will continue to see more and more video conferencing for meetings, client events, and court events. The Courts were thrust into video conferencing and unlikely to go back entirely to pre-covid methods of managing court lists. Investment in hardware is another consideration for law firms. Laptops provide so much more flexibility and efficiency for lawyers than a desk top computer.
If we consider changes the way law firms operate as a result of the Covid-19 crisis, then changes will need to be made in the ‘back end’ to support operations. Appropriate administrative systems must be put in place to support more flexible ways of working. If they weren’t already, centralising support teams, outsourcing, matter management and budgeting, and finding lower cost markets will feature on the agenda of smart law firms.
Law firm leaders who have not considered the impacts of digitalisation or the need for process improvement as a result of the Covid-19 crisis must do so now to prevent being left behind.
4. Communicate and engage.
The Covid-19 crisis has unquestionably resulted in much less face-to-face communication with our clients and our staff. And it is anyone’s guess as to how long the Covid-19 crisis will continue.
From an internal point of view, the personal elements of the Covid-19 crisis have been extremely challenging, particularly the lack of social interaction while working from home. For those who have offices and staff in Melbourne, there were obviously months of isolation. We know that even pre Covid-19, there were high rates of mental health problems among the legal profession.
Firm leaders must continue to be closely monitoring the cultural impacts of the Covid-19 crisis. They must champion flexibility during this period. Collaboration and connectivity are also essential and not just from law firm leaders, it is everyone’s responsibility. A catch up via zoom is not the same as a catch up in person but during this period it all helps. The small things can make a big difference.
From a client perspective, the same rules apply. With minimal face-to-face interaction, it is essential to be available to properly support your clients. As the legal sector changes because of the Covid-19 crisis, so are your client’s businesses. They too face a raft of unprecedented challenges.
Law firm leaders, partners, and those with BD responsibility must connect proactively with clients and LISTEN. The way your firm has historically delivered its legal services might need to change alongside your client’s changing priorities. Genuinely connecting with clients during this turbulent period will go a long way to building trust in the relationship.
Law firm leaders need to be on the front foot dealing with the Covid-19 crisis. What I have suggested above is what I would consider to be the basics, the minimum response all firms should be considering. Please reach out if you would like to discuss in more detail.
Andrew Price
4 January 2021
Founder, Inspire Mgt