White Papers | Law Firm Vision: Essential For Long-Term Success
Law firm managers are facing intense internal and external pressures that make strategy and innovation more crucial and differentiation more difficult.
Forward-thinking law firms understand that they are operating in an increasingly competitive marketplace and that they must transform themselves in order to thrive. The initial step in this transformation for law firms to be successful in the long term is to align a firm’s processes, infrastructure, strategy and culture with a clear understanding of the current and future wants and needs of clients and prospects.
Intense Pressures
Today’s law firms face significant internal and external challenges as they strive to increase net income per partner and compete for both clients and lawyers in the legal marketplace. Traditional models for law firm success have grown outdated and law firms are realizing the need to reinvent themselves in order to survive. Common pressures facing law firms and law firm management today include:
- Client-driven pressures, such as demands for increasing levels of service at the same or lower costs. The 2005 Litigation Trends Survey from Fulbright & Jaworski L.L.P. found that the number one message corporate counsel would like to deliver to their outside lawyers was, “control costs.” Other pressures include the loss of clients from mergers and acquisitions; the corporate trend to reduce the number of law firms used; and the push to keep commodity legal work in-house.
- Competitive pressures, such as having to compete constantly for clients and resources; having to contend with new strategic moves that make competitors more differentiated and threatening, and having to deal with the commoditization of even high-value work whenever the competition is based on who has the lowest fee.
- Internal pressures, such as escalating associate salaries; the need to manage expectations and meet profitability goals; the risk of star performers jumping ship and partners burning out; the risks associated with providing legal opinions and guidance; and the responsibility of running large, complex organizations with many “strong personalities.”
All of these market developments indicate that traditional law firms must rethink how they provide services, how their workflow is managed and how they fully leverage their strategic technology investments to have the greatest positive impact on operational efficiencies and profitability.
Law Firm Vision Can Differentiate
The key to overcoming these pressures and competing effectively is embracing a law firm vision of innovation and differentiation. Law firms that are looking to the future take the time to figure out where they currently fit in the marketplace and where they want to fit. They create a distinctive and defensible position and then plan how to get there.
Law firms need to dig deeper and understand emerging trends, competitive forces and changing industry regulations, in order to help their clients and prospects identify their own company’s opportunities and threats. Once you understand what’s happening in their market, and what is likely to happen in the future, you can interpret how to add more value to the relationship.
Essential questions that must be answered include:
- Why are we attracting clients?
- What’s driving their markets?
- What kinds of industry changes, market changes, competitive positioning are our clients going to be experiencing within that market?
- How are changes in our clients’ markets changing the way they view our services?
- How do we need to respond to those changes?
- What services will be essential to meet the changing needs of our clients?
- How can we add more value to our relationship with our clients?
- How will we attract new clients in the future?
The answers to these questions are the foundation of a law firm vision. Implementing it successfully can involve a variety of actions and initiatives, but the most important is to work toward aligning what you do with how clients think about and acquire legal services.
Critical Consideration: Demographics
Law firms in some cities already are finding it challenging to recruit the people they need as a result of the exodus of Baby Boomers from the workforce. The reason is simple supply and demand. Between 2010 and 2020, it is estimated that the skilled-worker gap (between available jobs and people who can fill them) will rise from 5.3 million to 14 million.
If you don't think your law firm will face a critical talent shortage in the future, look around your office and count the gray hairs. Who will fill these jobs? Generations X and Y, both of which have very different views of the role of work in their lives.
A report issued by the Families and Work Institute in October 2004, “Generation and Gender in the Workplace,” found that younger workers are less willing to put in long hours and instead are more focused on pursuing interests outside work than were their predecessors. Generation Y employees are less likely to be “work-centric.” The study also found that young men and women would choose to stay at the same rung on the career ladder in order to preserve their quality of life.
While many law firms have resisted significantly adjusting the way they operate to accommodate generational differences, successful firms will look for ways to utilize technology investments and changes in workflow processes to incorporate greater flexibility that will be essential for recruiting and retaining younger attorneys.
In conclusion, strategy and innovation have never been more crucial for law firms to achieve long term success. Intense internal and external pressures are squeezing profitability for many law firms and making it more difficult for them to find the sweet spot in the market.
Forward-thinking law firms are transforming themselves by aligning their processes, infrastructure, strategy and culture with a clear understanding of the current and future wants and needs of clients and prospects.
