Changes Are Coming to the Legal Industry. Is That So Bad?

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...the global pandemic will accelerate, and in some cases exacerbate, trends that the industry has already been experiencing

Few certainties exist regarding what the future holds for the legal industry, as even the most accomplished experts don’t have a clear understanding or agreement on how things will develop in the upcoming weeks, months, or even years. Many law firms have already begun to pivot and adapt in various ways to address the dire economic conditions, and we can expect to see a multitude of changes that will continue to cascade throughout the sector, some temporary and some permanent.

Yet, rather than upending the legal industry completely, it is my belief that the global coronavirus pandemic will merely accelerate, and in some cases exacerbate, certain trends that the industry has already been experiencing on a sporadic basis in recent years.

One might be tempted to view the pandemic as a perfect storm – the confluence of numerous powerful forces coming together all at once, creating an ideal catalyst for change to occur. For me, however, it brings to mind an occurrence that is colloquially known as Hemingway’s Law of Motion, which draws upon the oft-quoted line from The Sun Also Rises when the character Mike Campbell is asked how he went bankrupt.

Answer: “Two ways. Gradually, then suddenly.”

Operational Changes

With a huge percentage of the U.S. now working from home, law firms have been forced to deal with the messy reality that some lawyers and staff members are more equipped than others to work productively on a remote basis.

We can expect many firms to be more flexible with time worked away from the office...

The more progressive law firms that have adopted lenient and flexible work-from-home policies will be the organizations that transition more successfully during the stay-at-home orders that have been enacted throughout the nation. Many of these firms will already have clear expectations in place and contingency plans to ensure that workers remain productive and engaged during the extended time away from the office.

Conversely, those firms that have been persistently reluctant to allow lawyers and administrative professionals to work on a remote basis will be impacted the most by the current situation, as they are not able to quickly provide the necessary technical or supervisory support to their workers who are stuck at home. Perhaps this will also mean that the physical location of talented workers will matter less over time, even after we are able to return to our offices.

In order to respond to these forces, law firms must develop detailed policies regarding which professionals can or cannot work from home once the pandemic subsides. We can expect many firms to be more flexible with time worked away from the office, creating programs and initiatives intended to support and encourage productive work-from-home environments.

...successful work-from-home models will result in better and more collaborative communications

Additionally, successful work-from-home models will result in better and more collaborative communications upon the return to physical worksites. The communication skills that are learned during this time of crisis will position workers to work efficiently with each other across all office locations.

Such systems existed prior to the pandemic and will surely become more prevalent in the coming months and years. For example, during my time as CMO at K&L Gates, we created an innovative system for business development (BD) coordinators and specialists to work in a collaborative team structure, one that was heavily reliant on both technology and active communication. These professionals had never met one another in person, and in some cases lived thousands of miles away from one another, but they still managed to have a productive and meaningful work environment, albeit on a remote basis. We know this to be true because we conducted employee satisfaction surveys and used the results to tweak and improve our approach.

...to be fully productive firms must be able to provide remote technical assistance and support

Not surprisingly, the pandemic has also exposed weaknesses in technological support in firms around the globe. Being able to access software and technology tools is critically important, but to be fully productive firms must be able to provide remote technical assistance and support for workers in need. Software as a Service (SaaS) models look more and more attractive given their benefits to a remote workforce and their ability to offer technical support as part of their service offering. And videoconference technology will surely be viewed differently as it becomes less about the high-priced VC equipment in office conference rooms and more about investments made to support remote workers, attract lateral candidates, and most importantly, allow for suitable client interface.

Expense Management

It goes without saying that law firms across the board will be keeping a close eye on expenses through the end of 2020.

...we can expect to see law firms take on a significantly smaller footprint than ever before

Where firms will ultimately differ is in the method and extent to which their business expenses will be confronted and controlled. Typically, the two largest expense items for law firms consist of real estate and personnel. From a real estate perspective, we can expect to see law firms take on a significantly smaller footprint than ever before. Many firms have been gradually reducing their overall square footage and have been moving to a single universal office size rather than maintaining large associate offices and even bigger partner offices. This has been a trend that has been slowly emerging in recent years but will surely gather momentum following the pandemic. Although I expect to see more collaborative and open spaces in the future, such spaces will need to remain flexible in case workers and firms are forced to return to social distancing measures.

As we saw more than a decade ago, the Great Recession accelerated changes that were already occurring prior to that downturn. For example, it was at that point that the BD function really began to gain traction in many firms.

...firms that continue to invest in their brand development were more likely to do well during a downturn.

Conversely, traditional marketing roles such as branding and communications were affected in more of a negative way, even though numerous studies have shown that firms that continue to invest in their brand development were more likely to do well during a downturn. I anticipate these trends will continue to be the case going forward, with less reliance on conventional marketing communications activities and more focus being placed on demonstrating a justifiable ROI for targeted and measurable marketing and BD campaigns. Activities that require a significant amount of time, but which tend to have a lower validated return, will be deemed less essential to firms, at least in the short-term.

In contrast, the creation and successful execution of compelling thought leadership, integrated digital marketing campaigns, and targeted client development (AKA sales) activities which can be directly linked to revenue growth will become more vital than ever.

...client development (AKA sales) activities which can be directly linked to revenue growth will become more vital than ever.

Considering the people side of the equation, we have seen a number of firms announce layoffs or furloughs in recent weeks, and I expect these instances to continue if the economic situation does not dramatically improve.

Marketing and BD departments are often hit the hardest during these times, as firms choose to forgo future revenue growth for current savings. There is a right way and a wrong way to handle such organizational decisions. Firms should resist the urge to take a knee-jerk reaction to cutting marketing expenditures in a drastic way, as this approach can have a regrettable effect for firms when demand begins to pick up in the future. By making significant, and sometimes extreme, cuts to their marketing department and BD initiatives, firms run the risk of tarnishing their brand; furthermore, they will not have the ability to adequately promote their services and capabilities while their competitors are getting ahead of them.

The key to balancing the competing needs of 1) reducing expenses during a time of economic stress, and 2) making appropriate investments in marketing and BD, is to ensure that the decisions of where and exactly how much to cut are made with careful thought and consideration for how best to enhance future growth.

The Evolution of the Industry

Although we will likely see a bit of a lull in law firm mergers in the first half of 2020 due to the massive uncertainty surrounding the coronavirus pandemic, I expect to see M&A activity pick up toward the end of 2020 as well as in the first half of 2021.

One factor to consider is that smaller firms which don’t have as many diverse practice areas, and therefore may not be as willing or able to withstand the challenging economic climate, might be more inclined to join larger firms as a result. Selling the idea of losing one’s independence to partners is a big hurdle for law firm leaders making the case to internal stakeholders who may be reluctant to join a larger firm, but I anticipate that it is an obstacle that may become a bit easier following the aftermath of the current pandemic.

... clients will be more apt to consider alternatives to traditional law firms given the demands companies will likely place on their legal departments

In addition, I believe clients will be more apt to consider alternatives to traditional law firms given the demands that companies will likely place on their legal departments to control corporate expenses, a trend that we have observed over the past decade. This will of course include alternatives such as legal process outsourcing providers (LPOs) but also will consist of consulting firms, legal technology firms, the Big Four, and other legal service providers.

We can expect to see projects continue to flow to in-house legal teams, work which may have traditionally been handled by law firms. This ongoing development will likely serve to increase the overall importance and stature of the legal operations function within in-house legal departments.

After all, someone will need to be directly responsible for ensuring that the correct choices are made for how the legal department spends its money on law firms, legal providers, and technology to support the business. In recent years, that task has frequently been the job of the corporate legal operations professional.

...building and maintaining durable relationships will be even more important today than ever before

The More Things Change, The More…

Last but certainly not least, we must remember that relationships, and connections, still matter.

Clients need help and guidance during these challenging times. They will still need to turn to trusted sources of advice and counsel. This truism means that the investment of time and effort into building and maintaining durable relationships will be even more important today than ever before.

*

Jeff Berardi is the founder and principal of Berardi Consulting LLC, a business that provides consulting and advisory services to law firms and other professional services organizations. With more than 20 years of marketing and business development experience, including C-level leadership positions at two global companies, Jeff offers a unique and astute perspective that can increase business efficiency as well as accelerate corporate growth. He can be reached at jberardi@berardiconsulting.com.

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