When you look at the legal marketplace,
what do you see?
With the implementation of the
far reaching Legal Services Act finally happening in the UK (albeit with
some fairly significant delays in related regulation), it seems the
right time to step back and assess the state of the market.
Talking to people in the profession
about this, from partners to in-house lawyers, business development directors
to IT professionals, through to trainees and law students, one thing is clear.
There is no single opinion on the
state of the market right now.
In fact, nothing could be further
from the truth.
Opinions are strong and polarised.
Is the glass half empty or half
full?
The world of pain
One group see the profession as an industry in decline.
Painful struggles with increasing
firm overdrafts and personal debt are symptomatic of underlying structural
problems with the profession, and the cash flow challenges facing many firms
are just another indicator that it's time to get out before the interest rates
rise and bankruptcy looms large.
With lawyers at both small and large
law firms working harder than ever, increasing competition from overseas firms
and LPOs
becoming more visible, and constant talk of a new wave of competition, does not
fill them with hope that easier times are ahead.
Small firms worry about hyper efficient,
large scale competitors with a resource base, national reach, consumer brand
and technology platform that they simply can't match. Large firms worry
about transactions being disaggregated and large chunks of profitable work
being placed with legal service providers with a cheaper cost base. Mid-sized
firms talk about being squeezed, with larger firms looking for work in new
markets just to keep their associates busy while they weather the current
economic storm, and about smaller, more agile firms punching above their
weight.
These people can often see the need
for change, but despair of the pace of change in many law firms, pointing out
that the culture and consensual nature of partnership often make decisions
glacial when they need to be made at the speed of the digital world we now live
in.
They look at the management of their
firm, and question whether they have the right skills and experience to thrive
in such a turbulent environment. Management themselves wonder how they can free
themselves from operational fire-fighting to spend time focussing on the
strategic questions that will define their firm's future.
The lawyers lower down the pyramid
see equity structures remaining in some firms that encourage low performing
partners to sit back and coast, while the best talent works their asses off and
often still finds it impossible to break into the club.
Below them are a generation of
students who have made a huge financial and personal commitment to enter
the profession, and are finding training contracts like gold dust. Those that
are lucky enough to find work may be confronted by suggestions that the legal
training system is in need of reform and is not equipping graduates with the skills they need
to excel in the profession and exceed client and colleague's expectation.
They may also be confronted with a
linear career path, and find that if that's one they are willing to
follow, then the demands made by the firm are at odds with a generation Y
philosophy that buts greater emphasis on work/life balance.
Those who see the world in these
terms often point to clients showing less loyalty and who have ever increasing
expectations in terms of service standards, yet in the same breath are looking
to pay less for that service. A widespread rejection of the hourly rate billing
model leaves many firms struggling to come up with a viable alternative and
without the capability to re-engineer their business model to support these new
fee structures.
The downward fee pressure squeezes
profit margins further, and even after several rounds of morale-sapping
restructurings and redundancies, with economic growth in the core western
markets slow at best, there's no end in sight.
Pretty grim huh?
Now those that know me know that I'm
on balance, a pretty upbeat person, so let's try and bring a bit of balance to
the picture.
There are plenty of people out there
in the profession who don't think like that. Who see the current time of change
as tremendously exciting. These are the people who see
A world of opportunity
First and foremost they see an
incredibly profitable sector that has weathered an unprecedented recession
and shown real resilience with relatively few high profile casualties.
They see businesses with the ability
to offer a broad portfolio of services that add real value to clients at
critical points in their lives or organisational existence. Many of these
services are counter cyclical (helping manage difficult economic conditions)
and many of which allow the lawyer to genuinely claim that coveted position of
trusted advisor.
It's not hard to point to law firms
that have access to senior people at some of the best and biggest companies in
the world and advise some of the most influential people who are shaping
society.
For those in the UK, having a core
competency in the English language and the common law system that underpins
many other legal markets means firms are well placed to support global
businesses and expand intro higher growth international markets (as indeed many
UK firms have done very successfully).
While there would be an
acknowledgement that the bar for client acquisition and retention is being
constantly raised (particularly by increasingly sophisticated business
development professionals and practices) this is raising standards in the
profession and represents progress. There is still a huge opportunity to win by
being ahead of this curve and setting the pace.
For those with one eye on the
future, advocates of the profession will point out that the chance of a career
offering not just the potential to earn big bucks, but one that can offer a
lifetime of intellectual challenge and stimulation, will always attract its
fair share of top talent, and that the training and development opportunities
within law firms have improved massively over the last ten years.
Those who see opportunity see the
ability to innovate as being a genuine source of competitive advantage, and are
looking at technology, process and efficiency as ways of
maintaining and indeed improving profitability in a fast changing market. The
ability to change quickly is a key enabler, and they recruit the people with
the ability to adapt and thrive to make this a reality.
They also see that market
consolidation can offers opportunities. Low price acquisitions, the ability to
pick and chose individual teams, to make strategic acquisitions of particular
clients or relationships, and the clearing out of some of the noise in the
market place.
Yes clients are demanding "more for
less" but that's a common refrain across all business these days - the change
facing the profession is not unique and in many other industries there
are organisations that came out as big winners.
A somewhat simplistic
categorisation, but I urge you to reflect - which messages resonate most, and
critically, what are you going to do about it?
Read more from
The Intelligent Challenge
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