The global economic downturn has dragged the legal sector into unfamiliar and austere territory. Even the most prepared and forward-thinking law firms now face vast changes in their working practices. Tough times have taught companies and organisations caution and frugality across every sector, with those unable to keep up the pace dropping off the market. These organisations are the legal profession’s clients, and they are demanding more outputs for lower fees. This is what is shaping the legal profession now, and will continue to do so over the next decade. The ‘more-for-less challenge’, as coined by Richard Suskind in his book Tomorrow’s Lawyers (2013), is transforming the legal profession into a buyer’s market. Law firms have to alter their practices now, to continue to be valuable to clients, or face collapse.
In conversation with The Lawyer this summer, Sir Nigel Knowles, Chief Executive Officer of global law firm DLA Piper explained that: ‘the [legal] sector as it stands is unsustainable.’ Knowles is right – law firms need to be more creative and innovative in meeting clients’ demands. He continues: ‘there are simply too many firms […] offering services without clear differentiation’. Knowles sees a solution to the more-for-less challenge in the consolidation of legal practices. Merging firms together will consolidate their strengths and attract a wider range of new business, presenting more robust competition against the likes of the increasing population of alternative business structures.
Some law firms have already begun to take steps to meet the more-for-less challenge. Hogan Lovells sets a good example of proving a lean service and turns to the innovative use of IT to maximise their outputs using fewer resources. The firm has produced online resources in e-learning and risk management tools for their clients across a variety of topics. To give an example, imagine their predicament when a client approaches the firm wanting to improve their compliance in competition law. Rather than assigning a team of lawyers, paralegals and support staff to provide bespoke assessments of that client’s projects and offering advice and guidance on each aspect of their work individually, Hogan Lovells can deploy their ‘Competition Electronic Training Experience’, which gives their client a ready made, off-the-shelf ‘learning, compliance and reporting tool built around key areas of competition law’ (Hogan Lovells, 2014). The client is able to roll this e-learning package out across it’s departments to up-skill many members of staff at the same time, at an agreed, fixed cost, saving them money. The obvious advantage for Hogan Lovells is that, so long as the online services are updated whenever current legislation is altered, or new law is made, the tool can be used multiple times for individual clients and, with some slight tailoring, with multiple clients simultaneously. This requires less billable hours being spent on providing this service. The firm can reduce the cost to their clients by spreading their services far and wide, through IT, without huge financial burden.
In 2012, Clifford Chance announced that its corporate team was reducing the space it uses in its iconic Canary Wharf building in London in order to reduce costs, cramming the whole team onto one floor (they were previously spread over two). This example shows the expensive impact of holding prime office space. However, with premises being such a costly issue, more needs to be done to maximise savings made, through better use of space. Lucy Burton, in her article ‘Alternative Workstyles’, suggests firms can reduce their costs by changing their locations. Burton recommends that, in five years, to stay profitable, larger law firms ‘will have some form of alternative sourcing. This could take the shape of captive centres in low-cost regions, back-office functions abroad or jobs being sent out to external providers’ (The Lawyer, 2014). The legal sector no longer needs to be so reliant on offices in the most prestigious districts of the world’s major cities, when they can rely on IT – namely video conferencing and cloud computing – to work from anywhere in the world.
Years of financial uncertainty have hit the legal profession’s clients hard, and in response, like law firms themselves, clients are making sure that they are getting the best possible value when investing in legal services. The legal profession’s clients are exercising more caution when spending, and they are highly particular about which legal services they buy. Law firms will find an increasing need to compete on the price of their services in order to attract the most profitable business. The legal profession will survive this challenge if firms’ partners consider merging with other firms to consolidate and strengthen services, making them more attractive to clients. In addition, firms need to embrace the use of IT to maximise their outputs at minimal cost, creating packages of online services. Finally, law firms should maintain a presence in the most prestigious locations, yet place non-client-facing services in other, less expensive locations to drive down costs. The legal sector is coming to the realisation that change is necessary to survive.