Adapt to survive.
Adapting and embracing change is essential to remain competitive and survive in the legal services provider marketplace.
With greater expectation from clients for ‘value added services’, alternative pricing structures and wider competition in the market from other law firms, the Big four and agile legal service providers, law firms must adapt to this change, with the failure to react fast enough not only impacting on profitability, but their very survival.
Increased expectation from clients and competition within the market has led to greater innovation in law, with firms challenging established working methods to achieve better service delivery whilst maintaining or reducing costs. The concept of law firms themselves have been redefined as beyond that of just legal service providers and the solvers of complex problems, to organisations who partner with their clients, better understand their market challenges, and provide flexible pricing and billing alongside greater efficiency and support.
In today’s world, law firms and their lawyers need to do and be more for their clients. In this blog we look at how law firms have adapted their infrastructure to embrace change within what is now a more competitive marketplace than ever before.
Legal Project Management
Legal project management (LPM), the effective use of technology, people and processes to lower costs, whilst boosting (or at least maintaining) law firm profitability has exploded over the last few years. Whist each firm differs individually, the role of a legal project manager is to look after the operational side of transactions to allow partners to focus on the legal technicalities of the work. By bringing cohesion to complex mandates, they help achieve greater efficiency and cost certainty for clients and firms across a range of matters
Used correctly, project managers can manage both internal communications on a project and some external relations with clients, including anything from scoping the resource requirements before the project starts to collecting and processing client feedback after completion. Some firms involve their project managers more directly with clients on pitches and cost negotiations, as a show of commitment to the project in hand.
Although not a new phenomenon (Baker & McKenzie have been using non-legal project managers on deals since 2010), Hogan Lovells, Herbert Smith Freehills and Linklaters have all made moves to expand their use of project managers in the past 12 months. This demand is also seen in the market, with Herbert Smith hiring a four-strong non-legal project management team from Berwin Leighton Paisner in October.
By offering greater efficiency and certainty on costs, and freeing up billable hours for partners, the better integration and utilisation of legal project managers on deals is a trend only set to grow over time.
Knowledge Management (KM)
The provision of knowledge, information and documentation assistance by law firms to their clients is of growing importance. Since helping one of our financial institution clients recruit their Global Head of Knowledge Management in 2014 and financial institutions and corporates alike looking to improve their own efficiencies and legal infrastructure in this area, the need for law firms to advance their own KM structures is imperative.
Knowledge Management, whether the production of learning and training materials or the internal management of firm documentation, is essential for clients to gain a quality service. Due to the time limitations placed on in-house counsel, from a client’s perspective, a law firm who is continually looking to add value through their KM team and push this agenda will come out ahead of those who are seen as less active and innovative in this area. Furthermore, the ability to offer these services at an international level is a distinct advantage for law firms in gaining significant panel instructions from global businesses.
Beyond the use of KM for purely Business Development and brand promotion, it can also be revenue-generating with the creation of bespoke KM tools to track legal and regulatory developments, such as A&O’s Rulefinder and Navigator at Simmons & Simmons.
As such, Knowledge Management – if structured correctly – can be leveraged with clients to provide a service of better value, and differentiate the firm in a competitive market. Law firms need to develop an outward-facing KM team to work with Partners and Business Development teams, whilst delivering high-quality learning and training provisions for clients.
Business Development
The growth of law firms on an international scale through lateral recruitment, mergers and office openings has thrust the role played by Business Development (BD) into the spotlight both in London and internationally. Our work with clients to build their Business Development teams across jurisdictions has raised our awareness of the importance of having a specialist, integrated and proactive business development function and the investment that firms are making to build their capability in this area.
There have been great strides made in the last ten years by many firms with regards to Business Development and how it is viewed internally. With the continued advancement of the industry, Business Development functions have had to become more connected with the business and move from a back office to a front office advisory function. The expectation and demands of today’s business environment means that law firms are having to recruit more specialised Business Development professionals with industry knowledge to focus on specific sectors and clients. Firms that do not continue to drive the development in this sense will soon be left behind in the market.
For international law firms with growing businesses and complex clients spanning multiple jurisdictions, the role of a coordinated Business Development function can help a firm both continue to increase revenue streams whilst gaining exposure to new clients. As such, the investment made into this function should be seen by law firms as a valuable long term commitment to their clients and therefore their own business.
Client Relationship Management
The way in which law firms manage client relationships is evolving alongside the various advances being made in both Business Development and Knowledge Management. To complement the traditional role of the client relationship Partner, we are regularly hearing more about how law firms are allocating more resource and responsibility to dedicated Client Relationship Managers.
Similar to those in legal project management, these individuals are from a non-legal background and work alongside the relationship partner to add further depth and focus to service and support their clients. Fundamentally, clients of law firms know that whilst having a relationship partner is important, they are still a business generator that have to produce revenue for their firms. Therefore clients visibly see these two roles as complementary to each other, and with a heightened level of commercial and personal service when Client Relationship Managers are employed in tandem by their panel firms.
In-house counsel within our network have noted that firms who have employed dedicated relationship managers have a clear differentiator in the market, compared to those who just employ the client partner model. Having Client Relationship Managers who are dedicated to firm clients, and with a goal to develop, integrate and expand the relationship further, adds emphasis to a firm’s commitment to their clients and their needs both domestically and internationally.
Consulting
The final way in which we have seen law firms look beyond legal services as their main client offering is through the establishment of standalone consultancy arms. This trend turns the idea of bespoke legal advice on its head, as firms give advice to in-house legal teams on how best to manage their legal services and become more involved in the commercial aspects of their clients businesses.
With six such consultancy ventures set up since last year, and firms with more established consultancy services further expanding their offering, each firm has taken a different and distinct approach to building this part of the business to best service their client’s needs. This includes the ability to provide contract lawyers (a service that has ballooned within major law firms since BLP initiated Lawyers on Demand in 2007), to the implementation of more specific technology and IT change management projects (Bird & Bird’s Baseline and Denton’s NextLaw Labs) and even sector specific offerings as seen at RPC Consulting and DLA’s Noble Street.
However, the response of some firms such as Eversheds and Addleshaw Goddard has been to take a more full-service approach, offering wider legal efficiency advice centred on their clients businesses. This includes advice on legal spend, process analysis, legal risk analysis and panel management advice alongside themes already discussed such as legal project management, KM and Business Development.
The expansion of Eversheds Consulting, established in 2010 and which now runs four business lines (a financial services regulatory compliance service, Eversheds Ignite, a contract lawyer service, Eversheds Agile, and a separate flexi-lawyer offering for financial services regulatory compliance clients), is testament to how firms can offer greater service to their clients. With revenue climbing year on year, it pays for firms to be business solution providers and not just legal service providers.
Conclusion
Whilst much is being made currently of firms’ plans for expansion and lateral partner recruitment, it is important to assess the validity of a law firm’s business to support their growth plans. Lateral recruitment and growth can enable and provide increased revenues, yet it is the infrastructure of law firms that will underpin this growth or impede it if it is not fit for purpose.
In the ever changing environment that law firms work within, it is those who continually assess their internal capability and client delivery services that will thrive in this highly competitive global marketplace. Whilst firms continue to judge themselves on their annual PEP performance, there is the potential to remain blinded to the need to address change within their businesses. We understand that there is a fine balance between giving clients what they desire and the costs of running their businesses, however, those that continue to push the boundaries of innovation and client service will stand a better chance of seeing the client recognition that, in the long term, will provide them with a strong foothold to continue to deliver of their firm wide ambitions and revenue growth.
By Tom Spence, Director at Fides Search