In recent weeks, the headlines say it all. Law firms are doing everything possible to minimise the economic downturn and the ongoing financial woes created by the COVID-19 pandemic.
How’s that playing out? Law firms and other legal service providers are cutting salaries and benefits, reducing staff working hours, freezing discretionary spending, cancelling summer associate programs, furloughing portions of the workforce, and even reducing partner draws.
And then there are the layoffs — that tactic of last resort that changes everything and fixes nothing — in particular, profitability. Granted, some law firms were in precarious situations even before the lockdowns. However, there are plenty that can survive the downturn provided those firms have the right focus.
But just what does that mean? While law firms can force a short-term gain through a reduction in headcount, the more prudent long-term approach to firm profitability relies on a client- and people-centric strategy.
It’s in the ROI
During this crisis, it is more important than ever that law firms create value for their clients and demonstrate that value to their clients. Consequently, in order to meet its client’s expectations, law firms must have the insight and input from a variety of business professionals. These roles were important in the past; now, they are critical.
Specifically, the legal operations professionals in any law firms include:
- pricing team members
- legal project managers
- practice group directors
- knowledge management experts
- data analytics experts
- business intelligence professionals; and
- innovation and value professionals.
As tempting as it may be, you cannot disinvest your way to long-term profitability. Clearly, now is not the time to cut back on your business professional team and suspend your mission-critical projects. These professionals, and the work that they do, are not simply nice-to-haves. If you want your firm to maintain profitability, market position, and competitive advantage through this crisis, these things are mandatory.
Before the current crisis, business professionals have created an amazing return on investment (ROI) for their firms. They will continue to do so as we advance into the “new normal.” In a large law firm, for example, it is not uncommon to see value generation accrue from areas such as:
- Precision Pricing — Pricing teams drive annual revenue improvements in excess of $50 million on average, just from informed rate setting and fee negotiations.
- Legal Project Management — Legal project management teams save their firms upwards of $10 million a year in write-downs and write-offs through better scoping and matter management.
- Smart Processes — Talent and practice group management teams enhance productivity (and morale) through better workflow, technology, timekeeping, and utilisation, as well as professional development tracks.
- Innovative Technology — Innovation or value professionals implement technologies that benefit the bottom line, whether through recouping lost time, enhanced productivity, or increasing client and talent retention.
These, too, are the levers a firm can use to differentiate itself and create a favorable position in a fiercely competitive marketplace now and especially once the crisis has passed. Indeed, it’s no surprise that clients are demanding more of their law firms, and that is likely to increase during this period of crisis and uncertainty. But just who will create the efficiencies that clients demand? That’s the role of the business professionals. They are critical to the most cost-effective delivery of legal services and increasingly important to achieve alignment with clients’ expectations.
Meeting Client Expectations
The expectations of many law firm clients can only be met today by the combination of i) the technical acumen of the lawyers; and ii) the operational and strategic expertise and insight of the business professionals. Exceptional client service requires both, not just the lawyers alone.
“Already the vast majority of modern corporate law departments employ legal operations professionals to run the law department and push efficiencies from their outside counsel. These legal operations professionals expect that the law firms they hire will have legal operations professionals, as well. Their role is to ensure that the department’s legal matters are priced appropriately, managed well, and handled efficiently”– Susan Raridon Lambreth, Consultant – Legal Profession, Legal Executive Institute
Any law firm negotiating for such work is be handicapped without similar legal operations professions on its side. Imagine a scenario in which a legal operations professional of one of the firm’s top clients looks to lean into his or her relationship with the firm’s pricing, legal project management, or client value leaders to collaborate on how to best partner through this tough period, but instead learns that the position has been eliminated. What message does that send about the firm’s commitment to delivering exceptional service and value?
While some firms are downsizing, other firms are recognising that their business professionals are crucial voices in not only designing strategies and roadmaps for effectively weathering the current crisis, but also for using the “pandemic pause” to implement powerful solutions and strategies for long-term competitive advantage.
This article was written by Susan Raridon Lambreth Consultant, to the Legal Profession for Legal Executive Institute, a Thomson Reuters publication.