6 Strategic Opportunities
1. Life balance versus performance ethic
Chargeable hours worked by employed solicitors are declining as salary expectation continues to rise. Employees are not prepared to work the long, arduous hours that made many of their employers successful.
Motivating young lawyers to perform at best practice levels is a function of engagement. They will not work hard because they have to or because they may fear the consequence of not doing so. Modern employees will only work well if they want too. They need to be engaged by the matters that they are working on and the talent that they are working with, all the while maintaining a healthy work-life balance. In short, get ready to pay more for less!
2. Generation skill sets
The management and motivation of talent will become a significant differentiator. Good firms will always earn solid profits beyond partner salaries through staff leverage. Attracting talent, retaining and compensating them won’t get easier.
Gen X lawyers (born 1965 -1980) grew professionally in a very traditional, fear-driven motivation culture. One did a good job because one feared the consequences of the alternative; partners were respected because they were partners, organisational and communication structures were hierarchical and obvious.
Generation Y (born after 1980) do not respond to the leadership styles that may have worked for the last generation of lawyers. They have more options. They will work diligently if they like and are liked by their direct report. They respond well to an egalitarian, open culture that regularly celebrates success and communicates constantly.
Partners wishing to maintain success need to learn and practise new leadership skills, not the ones that they learned by being mistreated themselves. The old “it was good enough for us, it will do for them” approach won’t work with talented employees.
3. The boutique emerges as the norm
Clients want specialists, even in commodity areas. Having made a decision not to be a large, general service firm the question begs, “What do you want to be?”
The reality is that most small and mid-sized firms are a cluster of partners providing a range of services based, not on client need but on current partner skill sets. Such firms must experience diseconomies of scale. Many would be better off as smaller, focussed, specific service organisations, providing specialised advice to selected industries.
Don’t forget the standard marketer’s clichés, “80% of profit comes from 20% of clients” and “about 70% of clients are unaware of your current service offering”. (In my experience, 70% of staff are also unaware of ones service offerings).
I think that we will see a growing number of top profit firms being quite boutique. Within five years boutique providers will, most likely, make up the entire top quartile of the high-profit sample population in all FMRC performance surveys.
These firms will out-perform the generalists in many areas, most critically in client quality and talent attraction
4. Good firms combat commoditisation with client intimacy
As clients become more sophisticated, perceived value is becoming more important than brand. Know and like your clients, become an expert in your client’s industry, their staff, suppliers and customers. Visit clients regularly and develop a keen awareness of the needs and wants of all critical individuals. It really isn’t that hard. It is currently a differentiator but will emerge as the norm.
The mid-tier firms of the Australian profession have experienced excitingly rapid growth in total fees bil led and profit in the last two years. Much of this growth has come at the expense of the top tier firms.
Depending on complexity and size of the task, legal work will, in all likelihood, continue to be shopped on this basis providing great opportunities for firms who have the flexibility to deliver value and the skill to deliver quality. Firms of all sizes and in many locations can benefit from this.
Another symptom of price fatigue has seen the growth in in-sourcing of legal work by significant corporate clients. It is only a matter of time until smaller corporate firms and small to medium-sized enterprises catch the bug.
This represents a good opportunity for entrepreneurial firms to provide part-time secondment, a retainer arrangement or some other form of permanent partnering.
5. Knowledge management a major differentiator
Maintaining a high-performance culture, quality and steep learning curves is all about the effective management of knowledge. Smaller and mid-sized legal firms are starting to manage this better.
Good firms should start to build data banks of knowledge detailing client information, precedents, matter strategy and practice support information.
Good knowledge management is much more than a technology challenge. To work well it must be cultural.
Partners and senior lawyers must embrace knowledge- sharing and owners must be prepared to see learning and lawyer skill building as an opportunity not an expense.
6. Flexible working arrangements retain talented individuals
The necessity to introduce more flexible working arrangements to retain talented individuals is likely to see the trend toward women dominating the profession gain momentum.
This changing demographic means that firm size (lawyer numbers and gross fees billed) will be less important to the maintenance of profitability than flexibility, quality, leadership and client intimacy. Good firms should ready themselves now.
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