The legal profession is facing an unprecedented level of change, bringing forth a lot of challenges but also opportunities for those open to grasping them, managing partners claim.
Ahead of The Lawyer‘s annual Managing Partners Dinner (ask for more information here) we asked a few of the attending managing partners to share what they consider the biggest challenge facing law firms today.
Freshfields Bruckhaus Deringer managing partner Stephan Eilers: The fragmentation of the legal market and the decline of the institutional relationship. As clients become more cost- and value-conscious many are pursuing ‘best of breed’ strategies, building ties with individual partners or practice areas rather than with firms as a whole. Add the rise of the disruptors like Axiom and Riverview and it’s no longer unusual to find three or four providers performing roles on the same side of a large M&A mandate.
This is challenging the models of the bigger firms, who for 20 years have offered clients multi-disciplinary (and multi-jurisdictional) solutions under one roof and built their businesses around the associated economic synergies. These firms are likely to pursue a range of strategies to compensate – some will merge, some will continue to expand internationally, some will shrink and some will specialise.
The firms that succeed will be those best able to differentiate their offering and digitally transform their operations to ensure they are using people, processes and technology to deliver the best client experience. The fact that the fragmentation process is eroding institutional knowledge makes this a doubly difficult task, making it vital to build the deepest relationships at every client touchpoint.
Winston & Strawn managing partner for London office Peter Crowther: Unprecedented competition, in its many dimensions. A law firm is ultimately a group of people that collectively serve certain kinds of clients/matters, and there is unprecedented competition to attract and retain the highest quality diverse lawyers and professional staff.
Technology continues to drive competition in service delivery as well as in sophisticated pricing of legal services. The reshaping of many law firms that are jettisoning non-strategic practices is driving competition from increasingly specialised groups of lawyers.
Total near-flat demand in the legal industry means that meaningful growth can only be achieved at the expense of other law firms, which intensifies the competitive environment. A highly competitive market itself means that only the most efficient, focused, and financially secure law firms will ultimately prosper in their segment of the market.
DLA Piper global co-chief executive officer & managing partner Simon Levine: The world is a very interesting place right now. We are seeing rapid change as a result of the increasing globalisation of a technology based world combined with unprecedented geopolitical and economic turbulence. The regulatory landscape is also changing rapidly as a result. Staying at the forefront of that regulatory landscape creates both a significant challenge and opportunity for law firms.
The challenge for a global firm like ours is to operate adeptly within this climate and seize the opportunity it presents for the benefit of our clients, while continuing to deliver legal services of the highest quality for clients that increasingly want ‘more’ and ‘better’ for ‘less’.
Osborne Clarke managing partner Ray Berg: I think law firms have a huge opportunity to recognise the benefits of diversity. We need to challenge stereotypes and breakdown preconceived notions of the sector to ensure everyone can thrive and reach their true potential.
At Osborne Clarke we want people to feel they are supported, so we’ve looked at how we can ensure that everyone, regardless of their background or characteristics, feels that they have the same opportunity to meet and exceed their potential in an inclusive environment.
TLT managing partner David Pester: Having the investment capacity to innovate and compete in an increasingly diverse legal market place is perhaps the core challenge facing law firms today. The traditional law firm partnership structure doesn’t lend itself to long term investment decisions at the scale needed to attract the right talent, grasp the opportunities of technological advances like AI and compete effectively with new market entrants.
The law firms that succeed will be those who tackle this challenge head on, whether that is by changing the way they fund their business or in how they find ways to creatively adapt their business and collaborate to deliver.
Travers Smith managing partner David Patient: For City firms, in particular, it’s the confluence of the “holy trinity” of people, space and technology issues. How to attract and retain the best talent? Where and how do they work – what’s the best property strategy for the 2020’s and beyond? And what impact will technology have on all of this in terms of the numbers of people we employ, their roles, and how much space we need for them?
Paul Hastings chair of the London office Ronan O’Sullivan: The fundamental challenge for the leading firms in the world is to continue to forge a path to growth in an environment of heightened competition for the premium work, where overall market demand remains flat in the face of an ever-increasing pressure to attract the finest talent at all levels.
DAC Beachcroft managing partner David Pollitt: There are many challenges facing law firms today, a number of which have been in play for some time. I would like to highlight one that may not be seen to be the biggest challenge today but could, if it develops, certainly become one very quickly. In short, it relates to the ability of our profession to remain attractive to young, talented people. In many respects, the profession has modernised significantly in recent years, but its approach to resourcing has not kept pace. It is still (largely) a traditional model and indeed, if the profession is honest, is one that survives on people working harder/longer than we contract for.
The workforce is changing rapidly and law firms need to adapt in order to remain attractive to young professionals. The partnership model does not have the allure that it had ten or 15 years ago. The profession needs to be flexible and be prepared to change fundamentally its approach to resourcing. This is going to be really challenging and it will be law firms that can adapt quickly enough that will be the winners. We must be careful, though, not to throw the baby out with the bath water. There are many talented lawyers who want to get to the top of their profession.
Increasingly, we are seeing a change in attitude towards long term professional service. Law firms can adapt and, in doing so, can set themselves apart by embracing a changing workforce – one that promotes flexibility.
Reed Smith managing partner EME Tamara Box: The biggest challenge for law firms today is nominally “efficiency”. How do we maintain the quality of our client service while continually striving to do more for less? It’s a question we’ve been asking ourselves for some time. At Reed Smith, we have just announced the opening of Reed Smith Global Solutions, a Leeds hub that will eventually house up to 100 staff and fee-earners primarily supporting clients and partners in Europe and the Middle East. Mirroring the services provided by its US sister hub in Pittsburgh, this hub represents our commitment to the evolution of our working practices. At the hub, we plan to use an open plan layout and an intra-department structure to allow individuals with different skillsets and experiences to work alongside each other to find new approaches to problem solving.
By locating these functions outside London, we are not only tapping into a rich seam of talent – 38,900 graduates annually to put a figure on it – but we are also able to continue to service highly valued clients on their day-to-day matters at a rate which works for us, and more importantly, for them. Technology also has a role to play in our new hub and in due course, our lawyers will have access to the vibrant tech industry in Leeds to develop new tools to improve client service. We are truly making more for less possible.
Eversheds Sutherland international managing partner Keith Froud: If you really wanted to, you could produce a list of challenges as long as your arm – technology, new entrants, market and geopolitical risks, the war for talent, prioritising investment, controlling the cost base, increased regulatory burden to name just a few.
But pulling all the threads together, it’s about attitude to change. In many ways the legal sector is as successful as it has ever been, and often not given the credit it deserves for adapting more than people think. But rapid change is coming which needs to be embraced by a combination of existing management and leaders of the future. The strategic priorities and values which firms adopt and implement need to take this into account.
And by the way, there are plenty of opportunities too.
For more information on the Managing Partners Dinner please contact The Lawyer events team at firstname.lastname@example.org.