Renewed Optimism in Legal Services Yields New Law Firm Challenges on Top of the Oldaderantuser
by Craig Dekshenieks, Director, Content & Marketing Operations, Aderant
It’s been a long ten years for law firms since the recession of 2008. Signs now suggest that growth may finally be returning to the legal services market. We’ve seen indications of this in a number of reports, articles and today, in the newly released 2018 Aderant Business of Law and Legal Technology Survey.
More than half (57%) of all respondents in our second annual survey said business in their law firm was “better” or “much better” than it was in the last 12 months. This is a notable improvement over the same survey last year. While that previous survey only polled US law firms, the data points in the same direction even when we filtered it for an apples-to-apples comparison.
The survey, which is unique because it primary polls business of law professionals central to the inner workings of a law firm, surfaced other findings that support the suggestion business is improving. For example, 71% of respondents said their firm has added associate attorneys over the last few years. In addition, sizable segments also said their firm had added headcount in other areas including marketing and business development, technology staff and both equity and non-equity partners.
Interestingly, our analysis of the data found the larger the firm, the more likely the respondent was to say business is better. This is especially true among firms with more than 500 attorneys.
Growth Brings Emerging Challenges on Top of the Old
When asked about the top challenges, respondents identified a mix of both traditional and emerging problems with which their firms wrestle. The top five challenges included the following:
1) 36% said pricing;
2) 33% said cybersecurity;
3) 32% said operational efficiency;
4) 30% said technology adoption; and
5) 26% said competition.
Cybersecurity is an example of a newer or emerging challenge. Amid a backdrop of what seems to be a steady drumbeat of high profile corporate breaches, cybersecurity has climbed the list. Among US firms only, cybersecurity jumped from sixth place last year to tie for the top spot with pricing in the 2018 survey.
However, law firms are still dogged by seemingly enduring traditional challenges such as operational efficiency. Law firm billing and invoicing is a good illustration – most respondentssayit takes their firm a week or longer to publish client invoices. About half (48%) say their firms spendtoo much time on the process.
From a law firm perspective, this stems from both internal processes and client-side initiatives. For example, respondents also cited the rise of e-billing and the proliferation of outside counsel guidelines (OCG) as friction points in process efficiency. OCGs can be characterized as long and detailed lists of charges, with a wide degree of variation from client to client, that corporate counsel says it will – and will not – accept from law firms.
Still, the legal industry largely remains a buyer’s market and so law firms will bear much of the responsibility for solving challenges, regardless of where they originate. And that’s an important takeaway for firms – that this period of economic upside we seem to have entered is an ideal time to push for innovation.
Innovation Emerges as a Responsibility in Law Firms
The conventional narrative is that law firms are sluggish and slow to respond. As Chris Cartrett wrote in a Think Tank piece about this survey last year, such “narratives often grow by anecdotes re-told over and over until we lose sight of the origin. There has been a narrative for the better part of 10 years that suggests law firms are slow to innovate and change-resistant.”
He disagrees with that assessment because he finds the methodical decision-making process among law firm leaders is sometimes mistaken for sluggishness. He pointed to evidence in the survey last year to support his position – and there is some new data this year that reinforces this notion.
This year the survey found some law firms are decidedly focused on innovation. About one-third (30%) said their firm has someone dedicated to the responsibility of law firm innovation. Again, large law firms stand out inthe analysis – the largest law firms were more than twice as likely to say their firm had an employee in charge of innovation.
Legal Technology with Impact
Along with people and process, technology often plays a critical role in innovation. While firms do seem to have hired considerably, it’s not sustainable to keep adding headcount. To that end, respondents were asked to rate a list of technologies common in law firms on a five-point scale ranging from “no impact” to “high impact.”
Among the technologies respondents said had either a “moderate impact” or “high impact” on their law firm included:
1) 90% said document management;
2) 88% said time and billing management;
3) 73% said financial management or ERP;
4) 70% said mobility and mobile apps; and
5) 70% said business intelligence.
Respondents were also asked to select the technology conceptsthey felt had the most potential. Here again, the top choices suggest law firms are aware of the challenges they face and are thinking about ways to improve efficiency:
1) 64% said automating routine tasks;
2) 54% said workflow automation
3) 47% said analytics
4) 34% said integration [of existing law firm systems]
5) 24% said mobility.
Automating routine tasks eliminates the need for humanintervention where possible, while workflow automation tools tend to drive tighter collaboration – and both support process efficiency.
Similarly, analytics, integration and mobility are strong signals that law firms understand they have important data and are seeking to tie it together in ways they can analyze it and then deliver insight to those that need it, wherever they are located.
The next 10 years in the legal market promise to be even more interesting than the last 10 years. As Chris noted in a related announcement, “Law firms should seize this period of economic optimism as an opportunity to challenge the status quo and transform their firm for the future.”
The full survey is freely available without registration: 2018 Aderant Business of Law and Legal Technology Survey.