With the market in a state of flux law firms must adapt their strategies in order to survive – and IT can be an effective enabler.
The UK legal services sector contributes £20.9bn to GDP; accounts for around 7% of the global market for legal services; is the largest legal market in Europe accounting for a fifth of the European fee income; and exports are estimated at £3,856m. The government recognises the importance of the legal sector and its potential impact on the country’s economic growth and stability, and is taking measures to promote the UK as a centre of legal excellence at home and abroad – from Brazil and Moscow to South Korea.
However, despite the government’s good intentions, the irony is that many law firms feel that the recent government legislation is actually making it harder for them to succeed, and it is highly likely to drive large numbers of firms out of business or force many to become legal services factories rather than operate as high-quality professional service providers.
The UK legal services market is clearly in a state of flux and many law firms are adopting alternative business structures or entering into strategic alliances as a means of survival and a way of competing with the big brands now entering the market. Some of these alliances appear, at first glance, to have been rather hastily arranged, and we hope that they do not ultimately turn out to be costly commercial misjudgements.
The indications are that many law firms appear to be resisting or ignoring the notion that they must more frequently review their strategies and their operational approaches if they are to stay on course and achieve the goal of continual improvement in business efficiency, operational transparency and improved human resource management. These will significantly contribute towards their competitiveness in the global landscape.
Profitably pricing legal services while offering a wider range of fee arrangements (blended rates, fixed fees, success fees) to meet the varied needs of increasingly cost-conscious clients, is vitally important to a firm’s future success. In part, this can be achieved by adopting a more project management orientated approach to pricing legal work, thereby ensuring that pricing and delivery take into account factors such as the anticipated duration of matters, how efficiently work has been performed in the past, what level of personnel and skills need to be assigned to matters, if there is merit in outsourcing aspects of matters etc.
Strategic human resource management is an essential lever that firms must utilise if they are going to achieve their commercial goals. The implementation of a more ‘balanced scorecard’ approach to key performance indicators by firms makes it clear that the alignment of human resources with the overarching goals of organisations should be a key business goal.
This necessitates careful consideration of issues such as competencies, the attitude of staff to ‘going the extra mile’ as well as softer and harder skills management. Furthermore, focused and appropriate strategies regarding talent management must be implemented across both the legal and the non-legal functions – to attract, harness, retain and grow vital talent. Law firms should now also be reconsidering how they plan to motivate their personnel in the future. Many firms already have compelling remunerations and reward schemes in place, but continual review of these to keep them fresh and relevant to the changing needs of the broader range of individuals that increasingly make up the modern law firm.
Only by ensuring that they are applying the most advanced levels of financial management can UK legal services sector achieve the status of ‘a centre of legal excellence’. Technology is the most effective enabler in this regard; however law firms must choose their IT solutions carefully as they will serve as the foundation stone of future efficiency and profitability.
Other professional services industries have used a business management solutions approach to business operation to achieve commercial advantage on the international stage; perhaps the legal sector can take a leaf out of their book. Business management systems are designed to help manage and optimise internal and external resources, comply with multiple regulatory regimes and provide insightful information. All of these elements working in harmony will be necessary to continually monitor and improve the UK legal sector’s business performance.
Today there are a variety of technology systems available, but as law firms adapt to changing business conditions, evaluating IT from a much more strategic perspective makes sound business sense. Any technology solution that is adopted must be considered with the firm’s current and future goals and needs in mind – it must possess the inherent capability to evolve in line with changing business needs, regulations and business practices.
Paul Tilling is strategic projects manager, LexisNexis Enterprise Solutions