A Survival Guide for Legal Practice Managers

A Survival Guide for Legal Practice Managers

The impact of the changing legal landscape on law firms

Tuesday, August 05, 2014

by Andrew Barnes, Financial Controller, Legal Lantern Group and President, ALPMA

From my perspective, there are five key take-aways from the results of the recent research ALPMA has undertaken with LexisNexis into the impact of the changing legal landscape on Australasian law firms and I wanted to share these with you before the full results are presented at the forthcoming ALPMA Summit.

1. Customer demands for better value is impacting firms...but few are changing their pricing strategy

Customer demand for better value and increasing price pressure is the number one factor impacting on Australasian law firms, according to the research.  Despite this, only 18% of firms report a major focus on changing their pricing strategy (increasing to 25% for larger firms). 

This reflects a fundamental shift in power to clients and a strong buyers’ market for legal services.  

The traditional law firm model has been built around billing clients for time spent on a matter.  But client sophistication is growing and this, combined with the commoditisation of legal services and a plethora of legal providers increasing competition, means that clients no longer have to accept the status quo.

Law firms ought to be working harder at understanding what represents value to their customers. They need to ensure they clearly differentiate their service offering from the next firm and price their services accordingly.

It is a brave step to throw away timesheets and most firms are not yet at the point where they feel they must do so.

In between the extremes of time billing and pure value pricing are numerous approaches which can assist firms with adapting to the changing market and I look forward to discussing this at the panel session I am facilitating with Tim Williams, Colin Jasper and John Chisholm at the ALPMA Summit on August 29.

2. Law firms are investing in technology

Most firms are enthusiastically embracing technology, with this ranking as the number one response to the changing legal landscape for the second year in a row.  

50% of respondent firms are making major investments in technology this year, an 11% increase on last year.  Only 3% of firms (all small firms with less than 25 employees) are making no technology-related investments.  Workflow, mobility and customer relationship management (CRM) are the top three technologies that law firms are investing in over the next 12 months.

It is no surprise that law firms across the board are turning to technology to help deliver the productivity and efficiency gains that they need.   The challenge for firms is to deploy technology in creative and innovative way to improve their business.

The majority of respondents are also continuing to invest in growth strategies (59%) and cost-cutting programs (58%) in response to the current environment.

3. Change is ‘work-in-progress’ at law firms – but slow change is better than no change

Where change is being made at firms, it is very much a work-in-progress, with most initiatives either currently being implemented or in the planning stage.  Of those making changes, very few have completed projects.  Only 9% of respondent firms have completed technology projects, 6% have completed cost-cutting programs and only 2% have completed growth-related initiatives. 

Despite this, the majority of respondents (58%) are satisfied with the rate of progress their firm has made in responding to the changing legal landscape over the past 12 months.  Staff at larger firms are least satisfied with their progress to date, while mid-sized firm respondents are the happiest (71%).

Law firms are risk averse places and they have not grown to what they are today by taking risks at every turn. While change is slow, responding slowly is better than not responding at all.

Firms need to take a medium term view and acknowledge that they should not be practicing law in five years’ time in the same way they are today.

Resistance to change, a lack of partner buy-in and no sense of urgency remain the key barriers to change at law firms. 

As one respondent put it: 

“Our partners are good at buy in but not initially - they take a while to investigate and approve which is not a negative thing. The lack of urgency is a cause of frustration at times. Support staff are slow to uptake some changes and we try to fully engage them to embrace the new initiatives.”

4. Non-Lawyers are playing a significant role in driving change

Non-lawyer managers are playing a significant role in driving change at law firms, most often working in partnership with the managing partner or the partner group to drive change and with support staff to implement change initiatives, according to the research.

A non-legal perspective is an incredibly valuable component in medium term strategic planning, as it is in day-to-day operational management. Progressive firms identify and respect the skills of the non-lawyers amongst them and ensure they apply the right people to the right situation.

5. Positive outlook with improving confidence in law firm leadership

Overall, most firms were upbeat about the future, forecasting a positive outlook for their firm over the next 3-5 years, with expectations for continued growth in firm size, profitability and improvements in firm culture.

I was also pleased to see that respondents are also increasingly confident in the ability of their firm’s leaders to respond to this challenging environment.   72% of respondents were confident or very confident in their firm’s leadership ability compared to 63% last year. 

Don't be complacent!

While the results show an industry that is in the process of transformation (albeit slowly), it is clear that there is no room for complacency.  

Is your firm doing everything that it can to thrive and prosper in this changing legal landscape?

Editor's Note:

The results of the ALPMA/LexisNexis Impact of the Changing Legal Landscape on Australasian Law Firms research will be presented by LexisNexis at the ALPMA Summit ‘Thrive and Prosper’, held from 27-29 August at the Melbourne Crown Convention Centre.  Register to attend Summit in person or online from your computer via our livestream broadcast.

The annual ALPMA/LexisNexis research investigates the impact of change on the Australasian legal profession, including how firms have responded to the changing legal landscape to date, what firms plan to do in the next 12 months, and how prepared the legal industry is to survive and thrive under in the ‘new normal’ environment.

122 respondents from law firms across Australia and New Zealand participated in the 2014 research, conducted via on-line survey in June, 2014. This is the second year the survey has been conducted. The full report will be available from the LexisNexis stand at the ALPMA Summit.

About our Guest Blogger

Andrew BarnesAndrew Barnes is President of the Australasian Legal Practice Management Association, (ALPMA), the peak body representing law firm managers and leaders. ALPMA provides an authoritative voice on issues relevant to legal practice management.  

He is also the Financial Controller for the Legal Lantern Group, which incorporates the practices of Harwood Andrews and Sladen Legal.
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