Navigating the future of legal business

As 2021 navigates additional COVID-19 challenges, pressure on businesses remain constant. But law firms were already on a steep trajectory of change. Here are four strategies to consider.

Australian lawyers have adopted or increased their use of tools and technologies in the last 18 months, allowing them to better manage their practices, collaborate with clients and work from home. Yet the pandemic only accelerated a sector-wide transformation that has been underway for some time. Established firms cannot coast on their legacy in an era where clients have a greater choice of service providers, and doing business with one firm for all legal needs is no longer routine. COVID-19 has demonstrated the necessity of constant adaptation. So, how should you prepare your legal practice for the future?

This article summarises key insights from a panel of leading legal innovators¹, assembled by Macquarie Business Banking in May 2021. It also reflects our knowledge from more than three decades of working with the legal industry. To learn more, read our full report, here.

1. Be different

Today’s law firms compete in a landscape where technology is redefining the choice between speed, quality and cost, dismantling the ingrained assumption that conflicting imperatives must be traded-off. When choosing between risk, efficiency, and perception, lawyers justifiably struggle, as delivery, reputation and competition come into play. High-quality legal advice can increasingly be purchased from anywhere – and doesn’t always command a premium.

Choosing between conflicting imperatives: challenging ingrained assumptions with innovation

This places pressure on legal practices to offer something distinctive, both to separate themselves from the “firm next door” and start-ups with significantly lower overheads.

For example, Hunt & Hunt Lawyers recruit practitioners with superior interpersonal skills who can build a powerful client affinity. “The only reason clients will still use traditional law firms rather than those other disruptors is if there's something unique being offered,” says Managing Principal Tony Raunic.

Firms that differentiate their purpose through bold leadership and a willingness to adapt will remain resilient, as circumstances change. One solution could be developing a niche set of practice offerings. “We’re not all things to all people and we’re very clear about that,” says Moores CEO and Practice Leader, Tessa van Duyn. Moores’ clients, largely in the for purpose sector, understand this point of difference, and feel the benefits of specificity.

2. Consider billing based on value, not time

Today, fewer than half of top-tier firms charge hourly rates. This is a shift being driven by technology (which reduces time taken to complete, via compression and automation of tasks, often at a significant cost to implement), but also shifting client preferences. Many clients demand to know a firm’s best price upfront. “They will no longer pay for your inefficiency,” says experienced consultant Joel Barolsky, Managing Director of Barolsky Advisors.

A growing number of firms bill fixed fees based on value or outputs delivered – potentially charging extra for a win. Subscription pricing is another model, allowing clients to pay a set fee every month and then call up as often as needed. At Moores, clients can choose from a three-tier fee structure. This involves what van Duyn describes as “necessities, something in the middle with a few added bells and whistles, and then a Rolls Royce option”.

3. Consider what to automate

Your firm might want to integrate online banking with internal practice management and accounting software. Or migrate more client files to the cloud and reallocate the IT savings to business development. “The top 25% of firms have always had access to whatever technology’s been shiny and new,” says Matthew Bolle, National Head of Legal at Macquarie Business Banking. “Previously, if you didn’t have $100,000 to invest, you couldn’t buy anything. Whereas in the last few years, access to technology has been democratised.” Given this shift in market dynamics, it’s imperative to invest, somewhere.

Today, new digital solutions promise to liberate lawyers from repetitive tasks like document discovery or executing standard form contracts. Applying this technology might turn around an important deal faster, which expedites business for clients, enabling them to solve problems and move their own agenda forwards. However, lawyers must constantly balance speed with due diligence.

“If you’ve got 45 non-disclosure agreements to review every month, maybe you can hire a specialist junior to churn through it relatively quickly,” says Jodie Baker, Founder and CEO, Xakia Technologies. “Maybe if the risk profile is low, then automation works.” She notes that firms are investing in data analytics to help inform these types of business decisions and prioritise the most profitable streams of work.

4. Keep lawyers engaged and inspired

The final challenge for firms is redesigning their talent strategies. Hiring smart young graduates is essential to build a base for the future and avoid a dearth of early to mid-career lawyers. In an era when the workplace is filled with four generations of employees, there is also a real opportunity for older hands to transfer knowledge. However, these younger lawyers require a lot of training, and the way that lawyers work is changing, which adds layers of complexity to this challenge. Maintaining human contact during 2020 was key, and Raunic’s firm made every effort to ensure a business leader kept in touch daily with junior team members. When safe to do so, Raunic’s staff will be encouraged to predominantly work in the office to allow for cross-pollination of ideas, build and maintain social connection, and foster a culture that binds individuals to organisations.

Young lawyers were once more willing to invest their time, with a view to obtaining partnership at some point in the future. However, as more people seek different paths, it’s also important they have access to alternatives, including non-billing roles within firms. At some top-tier firms, graduates can join legal operations teams, whose role is to create innovative new products and business processes that redefine the practitioner’s role.

So, what lies ahead?

“I don’t see a world where artificial intelligence will replace lawyers, and we’ll just push a button and legal advice comes out; I just don’t,” Barolsky says. The future for the legal profession is bright – and the best firms are giving lawyers a chance to write it.