Although the predicted time frame varies, most business economists suggest that a recession is on the horizon within the next two years, according to a survey by the National Association for Business Economics released in late February. At the end of the year, many CFOs were predicting recession in the U.S. by the end of this year, and The World Bank lowered its projections for global growth in its ominously titled January report, “Darkening Skies.” We cannot predict when or whether a downturn will occur, but we know from experience that those who maximize their operational efficiency are better prepared to succeed, regardless of the economic situation.
We recently published a whitepaper, “The Edge Effect of the Legal Ecosystem,” comparing corporate law departments’ and law firms’ roles in the legal ecosystem to adjoining ecological habitats. In ecology, the term “edge effect” refers to the boundary of two or more different habitats, where scientists find greater diversity of life, including unique species that are specially adapted to the conditions of the zone where the two habitats come together. Similarly, in their respective legal habitats today’s corporate law departments and law firms face different market pressures and have different resulting needs. Law departments are seeing an increased demand for legal services without associated budget growth, a heightened focus on risk management and cybersecurity, and an increasingly complex regulatory environment. Law firms face increasing competition for legal work, changing client relationships, and a tight market for strong talent. These respective pressures conflict in many...
This year’s Annual Law Firm COO & CFO Forum focused on the ten years of change since the economic crisis of 2007. I had the pleasure of moderating the panel, “Boats Against the Current: The Evolving Law Firm Business Model” that included a diverse panel of c-level executives who explored the changes that have occurred to the law firm business model. Most notable, however, we examined how operations leaders have risen to the occasion and are charting a new course for the c-suite – one that is more directly influencing firm strategy, business development and revenue-generating activities.
Forward-thinking law firms and law departments are looking beyond internal staffing and cost-reduction strategies, and are pursuing custom-tailored solutions for service delivery. By using outside providers to deliver services, leading law firms and law departments can place a greater emphasis on their core business. This enables organizations to focus on areas that are the most strategic and differentiating to their clients.
As corporate clients continue the journey toward operational excellence, law firms are being challenged to respond to corporate client requests to improve transparency and efficiencies. With corporate legal spending on outside counsel continuing to decrease – it was down 2 percent in 2016 according to our annual law department survey – we are seeing inside spending as a percentage of revenue exceed outside spending for the first time. This is resulting in law firms seeking ways to differentiate themselves in an increasingly competitive market.
There is no denying the fundamental shift that is underway in the legal industry. Both law firms and corporate law departments are examining new metrics to track outcomes and report on success, leadership roles and responsibilities are expanding to keep pace with fluctuating market demand and law firm service delivery models are evolving to keep pace with corporate client demands. Cutting-edge law firms and law departments understand that in order to keep pace with change, they must actively draw and learn from clients, competitors and other thriving industries.
There is no denying the fundamental shift that is (and has been) underway in the legal industry. As a result, we are witnessing cutting-edge law firms striving to adopt more sustainable business models to meet evolving client needs. While it’s important to discuss theories behind why the legal market historically resists adapting to change, we believe a greater opportunity exists in focusing on how industry leaders can respond to and achieve success in today’s environment.
Many law firms are seeking to keep pace with the rapid changes occurring within the industry today. A law firm’s culture and structure are key factors as clients set requirements to ensure legal services meet their unique needs, firms’ attorney and staff expectations change with every generation and technologies evolve at the speed of light.
On July 21, iManage finalized a buyout of their core business from HP to become iManage, Inc. The announcement brings with it a certain sense of electricity and excitement that has been missing for some time. Past mergers required some thought around how the core business of iManage would integrate into the overall strategy of the larger corporate entities, and what affect that would have on their clients. With this announcement however, everything just feels right.