Tomorrow’s Law Firm
17 January 2017
Back in the mid 1800’s, many people in Western Europe were resistant to the introduction of the combustion engine driven vehicle. Their insistence that it would never replace the horse and cart partly contributed to the United States economy accelerating at a much faster pace in the mid-to late Victorian era. Change can be unsettling, but only by embracing it and working out both the opportunities and the challenges - and facing both head on - can civilisation progress and develop.
Today, every industry and sector across the globe faces its own challenges in an environment when the nature and speed of change is unprecedented. None more than the legal sector, which has changed dramatically over the past decade.
Our 25th Annual Law Firms’ Survey 2016 provides some fascinating insights into the global performance of the world's top firms but also reflects on previous years and, crucially, looks at the firm of the future, and the challenges it will face. The upshot is that those willing to embrace new ways of working, new technologies and workforce changes will thrive. Those that don't may well fail or just gradually shrink away until they lose any meaningful market presence.
Key drivers in the sector include significant consolidation in the market through mergers & acquisitions, greater international expansion, a wave of US firms penetrating the UK market and the impact of the Legal Services Act 2007. Alongside this, 'Megatrends’ such as the rise in digital technology (including the potentially seismic shifting AI), major changes in the geo-political landscape and social change are all leading to unprecedented levels of disruption.
So how should law firms respond to this constantly changing landscape?
There is an old adage that “a fish rots from the head” and in my view the single most important factor in any successful business is the need for clear and effective leadership. Looking at the legal sector, it’s clear that the best performing firms have leaders who are embracing new ways of working and thinking ahead whilst at the same time managing the basics well (eg pricing, cost base, lockup etc). They are also clear in their aims and objectives, carrying their partners with them through clear and timely communication.
The advent of a step change in technological advancement coupled with the need to replace obsolete existing IT, means that firms are going to have to find new ways of funding the partnership. Worryingly, 79% of our survey respondents were either extremely concerned or somewhat concerned that the speed of technological change will stop their firms meeting their ambitions over the period to 2025 even though the use of digital is anticipated to increase significantly.
The need to embrace technological change is inextricably linked with having a clear understanding as to what the size and shape of the future workforce will look like. With a billion extra people by 2025, and life expectancy continually rising, the fastest growing segment of the population will be the over 65s. Leaders must work out how this group will co-work with baby boomers, millennials, generation X and generation Z, all of whom have different wants and needs ways of communicating and collaborating. Rethinking the firm’s work-force, how it will co-exist with new technologies and how traditional career models will change, will be essential medium to long term strategic priorities.
Global economic power is shifting from the highly developed economies such as North America, Western Europe and Japan to economies such as China, India and Brazil and given changes in the global landscape, the leadership teams of law firms need to take a closer look at the markets that hold the maximum growth potential and develop a culture of cross border working and collaboration. They need to promote and enable the movement of their talent globally to service the global needs of their clients. Worryingly, though, our survey suggests that there are limited plans for expansion into new territories by 2020 and 2025 which raises the question as to whether law firms are responding sufficiently to geo-political change.
The future is exciting for law firms, but they must act now if they are to make the most of the opportunities that lie ahead.