Tag Archives: millennials

Managing and Growing a Law Firm, Part 3

In this final article in the series of three, I highlight the legal scene in Asia, the changes to the legal industry, and the different resources available to law firms for expansion. I also take a look to the future, and share key leadership qualities.

In my first article, I shared my thoughts about managing and growing a law firm and in the second article, I discussed the global legal industry and its challenges.

I have previously discussed why firms need to look to the future, as they cannot live in the past and will soon become irrelevant in this fast-paced, tech-savvy environment. Disruptors are already well established and eating away the market share of many firms. Artificial Intelligence (AI) is here to stay and will become more and more sophisticated. For example, standard contracts are now easily available from the internet and there are other solutions in the market to make the “bread and butter” legal services no longer the “black art”, which at one time nobody understood. And then there is the growth of the “in-house” legal departments eroding business lines.

Leadership for the Future

To future-proof themselves, law firm managing partners need to “lead” and not “manage”. I have encountered many managing partners who manage (and at times micro-manage) rather than lead. Some are good at managing but many miss the critical role of a managing partner, which is to lead, have a vision and to inspire and drive the partners to achieve that vision. Then there are those who are poor managers, the ones that micro-manage or those who are indecisive and are too involved with the detail to see the bigger picture, or simply do not have time to manage. All these recognisable conditions lead to inefficiencies and mismanagement, creating potential financial, retention and reputational risks for the business.

As I shared in the first article, I believe that the day-to-day management of a law firm should be left to business professionals who have the necessary skills and experience. Hiring people with this skill set at an appropriate level for the firm is key. Firms need to hire business professionals at the right level and not under-hire. I would caution that hiring at an inappropriate level (too junior or too senior) will lead to additional issues and may be a wasted investment.

In the commercial world, all well-led and well-managed corporates will have a chief financial officer, chief information officer, chief marketing officer, etc. These are professionals in their own rights, and contribute to the success of the business. Why then do law firms think that partners can run such functions in which they have no real expertise or experience? Part of this stems from a “cost” rather than an “investment” mentality. I think what is not appreciated is that partners are being taken away from their core competencies and thrust into something that they are not trained for. What is not accounted for in the Profit & Loss Account is these lost partner hours that could be better utilised in marketing and discharging work which ultimately adds to the bottom line.

In addition to having a sound professional support infrastructure, it is important for leaders of law firms to interact within the industry, attend relevant conferences, keep up-to-date with major changes in the market, and respond promptly to the changes that are taking place in the industry. Keeping up with the legal press is also a must.

Law firm leaders need to have a strategy and a “laser-like focus” on what they want to achieve, and have a formalised succession plan to ensure there is an ongoing legacy for future generations.

Staying Relevant

The key to relevancy is a vision, a stated purpose, an evolving strategy to move with the times, a laser-like focus on the ultimate goal, investment in a sound and professional support infrastructure. Bringing all these together requires a strong and decisive leader with an innovative and flexible mindset.

Being Inclusive

To achieve these goals, it is very important for the management of the firm to be inclusive and to seek the opinions and insights of the lawyers and the business professionals who can help shape the present and future of the firm. Having a sharing and open culture is also important, so that all employees know what the firm’s vision is, and what they are striving to achieve.

At the end of the day, the management of a firm is in a stewardship role. The priority of these stewards should be to lead the firm and make it better than it was when they were put in the leadership position. Having this mindset will help shape and create a legacy for future generations. I would also encourage management not to take a short-term view on all matters. In particular, longer-term investment strategies are required in this competitive environment, as the firms that take a short-term view are unlikely to survive. 

Modern Lawyers

We live in a new age of millennials who are entrepreneurs at heart and are very much plugged into the ‘gig economy’, Much like all of us in this new age, they want instant gratification. This group of young lawyers comprise the engine room of the 21st century law firm, and very much the future of the business. This is where I believe a disconnect occurs. The current leaders and managers in law firms are most likely middle-aged and “Gen X,” brought up in a different age and with different values which included working hard, being in the office 9 am to 9 pm, and coming up through the ranks with the ultimate goal of being a partner in a firm.

This is not necessarily the mindset of the modern lawyer, who has many more life and work choices than the previous generations. Law-firm management has to listen carefully to younger lawyers and take heed of their needs to make them productive and engaged, and to retain them in the business long-term. Opportunities to work flexibly and remotely are high on their list. This could mean flexible working parameters and strong and secure IT systems to ensure effective and productive remote working. If this is what it takes to make this generation more productive and create an attractive long-term career path for them, then firms need to respond appropriately to this changing world with both action and rewards.

Women of Law

Firms also need to address the ongoing issue of women leaving the profession. Law firms lose many talented women in which much investment has been made when they decide to have a family. Sadly, this talent is often lost for good. Firms should do a much better job of providing flexibility and alternative career paths, thus giving these women an opportunity to look after their families while also adding value to the business.

Concluding Thoughts

Let’s not forget that 20 years down the line, the millennials group will be leaders of the firm, and they will have a different set of issues to deal with which we can’t even begin to imagine. I think if the current leaders can forge a blueprint for flexibility, succession, and legacy, this will be ingrained in the DNA of the young lawyers and will bode well for future generations.

In conclusion, my three top tips:

  • Have a clear vision and purpose, set accountable milestones for these to be achieved, and be inclusive of all in the firm
  • Managing partners need to “lead” not “manage”. Leave the management and the execution of strategies to the business professionals
  • Build a firm for the future with innovation, the millennials, and women in mind.

Eight Reasons for Optimism

2 squareThere has been no shortage of pessimistic predictions for the future of legal practice. Issues such as graduate oversupply and underemployment, digital disruption and increasing disintermediation, increasing price competition coupled with increased cost of delivery, greater client empowerment and price sensitivity seem to dominate the legal media.

In addition to these now perennial issues, firms are now living through significant changing generational demographics among the partner / director base. Some firms now have three generations within their partnership, and the Millennials are on their way! The Baby Boomers, Gen X, Gen Y and potential millennials all have differing views around collective endeavour and entitlement.

Although all of these issues and challenges are real and here, there remains cause for optimism, certainly in Australasia.

FMRC data indicate that many firms are growing, increasing revenue and profit, retaining excellent clients and enthusiastic, capable talent. Having served the profession since 1989, I have seen significant change – but change rarely manifests in the degrees of profundity championed by many ‘black hat’ commentators. Change in the legal services market has been a constant, sedimentary process, never a cathartic baby – bathwater – footpath scenario.

1. The ‘disrupters’ don’t seem to be disrupting

There has always been space in the Australasian market for firms of all shapes and sizes. In recent years we’ve seen a number of alternative models emerge. What we have not seen is a rush of clients away from existing firms to the providers of ‘new law’. Nor have we seen market incursion by non-lawyer providers or new entrants in significant numbers. The profession is, in fact, remarkably stable. Lawyers may be practising inside alternative structures or under international brands, but the number of practising certificates relative to total legal market has been remarkably constant for many years.

2. An increase in shareholder class actions should prompt a swing in the insourcing / outsourcing cycle

When I started working with lawyers, two percent of practising certificates in NSW were held by in house lawyers; it’s now about 32%. This has been a significant structural change.

The insourcing of legal work was thought to be a cyclical phenomenon, and perhaps it still is. I suspect that company directors (and their insurers) may become increasingly risk averse as class action litigation increases. This may see significant work returning to the private profession as a matter of good governance and risk minimisation.

3. Price has stabilised (but watch the discounting)

I recently read an article reporting on a large survey of corporate lawyers that concluded that 70% of respondents felt that they received ‘fair value’ from their current providers. This is good news.

All of the segments surveyed by FMRC in Australasia show modest annual increases in price, and have done for the last three years. That said, all you have to do to get a discount is ask for it.

I am seeing more firms investing significantly in improving the client experience, explaining and delivering value and building their brands through trust-based relationships, all the while maintaining pricing levels and providing clients with choice of pricing methodology.

4. ‘Big law’ has left the GFC behind; they are by and large succeeding, employing and innovating

Far from facing a predicted death, large Australasian firms are doing well. Some are dealing with on going challenges, but most are increasing graduate intake, salaries and profit. In the main, partner and lawyer productivity is up and expenses are being contained: a good recipe for on going business success.

5. ‘Mid-tier’ firms are stable as a market segment, although competing for talent and clients

I have studied this market segment for a long time. We’ve listened to advisers predicting the demise of the mid-sized firm for decades. The remarkable truth is how stable this segment has been, for decades. The size of the market, productivity measures, profitability measures, and graduate intake are all remarkably stable.

Within the segment, there is significant competition for both clients and senior talent, but this is actually beneficial to the market as a whole. These firms are having to provide greater value, innovative solutions, better employment conditions and opportunities, and more innovative profit-sharing approaches.

6. Small firms continue to do well, particularly those that collaborate

I’ve watched and measured groups like Law Australia and Law Link in New Zealand as they have developed over the years. I am utterly convinced of the merit in small firms collaborating to achieve success. Sharing resources, pooled buying of expertise, advice and services delivers an economy of scale that many small firms could only dream of.

Outside such groups many smaller firms are doing well. Commoditisation remains a constant challenge but technology and international process outsourcing are returning profit margin to offerings that stopped being profitable some time ago

7. The quality of the next generation of leaders and lawyers

WOW, interviewed any graduates recently? I don’t know whether to be excited or terrified, but for my money the future of the profession is in good hands. These people are very impressive.

8. Economists and futurists seldom hit the bull’s eye

We’ve seen some bold predictions in the legal media in recent times, some predicting the end of days for lawyers. Who knows? One day we might all be digitised out of work, but I doubt it.

Predicting booms and busts relies on a set of considered assumptions. Many get it wrong because they assume that markets behave ‘perfectly’, informed consumers making rational purchasing decisions. The thing is, they don’t. In fact, the very essence of consumer marketing is to get ill-informed purchasers to make irrational purchasing decisions. How can a $7000 handbag exist when it does exactly the same thing as a supermarket shopping bag?

Markets don’t behave perfectly and consumers don’t usually buy the quickest, cheapest alternative, even if it’s better.

There is little doubt that commoditised, repetitive tasks are being digitized out of the hands of lawyers. Its also likely that some people in some market segments will choose to purchase from those with whom they have developed relationships over many years. What ever happens, it’s highly unlikely to be all or nothing.

Change has been and will continue to be sedimentary, layer upon layer. Change can be and should be managed, indeed it is being managed right now. Good firms will continue to be good firms. The emerging digital economy presents opportunities that will enable many firms to thrive. I remain extremely optimistic.