BY RICH STEEVES
Law firms have not changed much in the last hundred years or so. In some ways, this is good – they are the “old reliable” in a world where technology and social mores metamorphose right in front of our eyes. But in some ways, this makes law firms the dinosaurs of the business world, clinging to old ideas and ways of doing business that sorely need updating. It’s easy to state this in general terms, of course, but to provide context to this issue, Cushman & Wakefield conducted its second annual Legal Sector Survey Report, including its first ever Legal Associate Survey report, and the results show that law firms need to make some changes in the next decade in order to survive in the business world.
“One interesting thing was a new question this year, as it relates to looking at competition and the legal sector as a whole,” explains Sherry Cushman, executive managing director and head of the Legal Sector Advisory Group. “The biggest concern for any law firm is where they will be 10 years from now.”
The question was asked concerning traditional partnership structures in the report. While just over half (51 percent) of respondents stated that the fundamental structure of law firms will stay the same, 44 percent stated that today’s partnership structures will be reorganized and 4 percent said that partnerships will no longer exist. That, of course, raises the question – what will the new paradigm look like?
“Will firms be on their own? Will they be acquired or merged into another group? There’s a fundamental question about how partnerships make decisions. They tend to be democracies, while major companies make their decisions via dictatorship. Business competition in the legal field is totally shifting to in-house, boutique firms, etc. How will it shake out in the next decade? That’s the fundamental question. All you can do as a firm is try to reeducate partners who are making decisions as to what other sectors are doing to make decisions that create flexibility and adaptability,” says Cushman.
Other data from the survey supports the idea that law firms are facing a future where they may shrink at an alarming rate. The survey sought to determine why attorneys leave firms. And, while retirement and termination were major factors, the leading reason why attorneys left was because they were seeking in-house positions.
Still, some firms are attempting to take a more business-focused approach to the law. According to the study, firms are tapping non-lawyers for executive positions, such as chief operations officers, chief technology officers, chief financial officers and more.
“The legal sector is finally making decisions based on business,” explains Cushman. “Legal has been about ‘how does it effect me?’ But firms have to start making decisions based on true business drivers. Smart firms are going out and expanding, bringing in non-attorney executive leadership. These people are highly paid to advise on matters such as business, technology and facilities.” Many of these executives, Cushman notes, are coming from non-legal sectors such as accounting, corporate environments or the government/military. “This shows that the legal sector has to respond differently; it has to be more business-oriented. Attorneys must accept the fact that they must practice law but allow others to manage facilities, technology and the like,” Cushman adds.
To be prepared for the future, firms need to be on top of various business drivers. In the survey, competitive fee structures and recruitment/retention were the top concerns noted by those surveyed. Traditionally, firms have billed by the hour, but businesses have become accustomed to service providers, like consulting firms, that charge a flat fee to perform a specific service. That is not a pricing model that firms have traditionally offered, but it might be something they wish to consider in the future.
As part of last year’s survey, Cushman spoke to attorneys in 27 cities across the country, and those conversations inspired the firm to add an associate-only portion to the survey. That component showed that, when associates are able to give confidential answers, they have different opinions than most partners might hear from them.
According to the survey, associates initially chose firms based on factors such as reputation, areas of practice and compensation, but they decided to stay at a firm based on compensation, mentoring and collaboration. In fact, the factors that associates cited as most important were: work/life balance, mentoring, work environment and compensation. While partners might believe that factors such as private offices might be important, it’s matters such as collaboration and technology that truly matter to young attorneys.
So, it seems that firms are at a crossroads. In order to meet business demands, retain talented attorneys and thrive in the new world order, they must listen, analyze and act on the information in surveys such as this one. For more information in the survey, click here.
http://www.insidecounsel.com/2015/01/29/law-firms-must-look-to-the-future-concerning-staff
