The pandemic has created a huge surge in the workloads for corporate legal departments, but that hasn’t been matched by any increase in budgets for legal spend. In fact, it’s the opposite — purse strings in many cases have been tightened.
However, there are now indications that this may be changing, as data collected in the last quarter suggests legal spend may be on the increase again in most regions around the world.
In the latest webinar for the Assessment & Activation Suite series, A Good Crisis? Optimizing Best Practice Models in the New Normal, panelists looked at what’s needed to run a practice group in these current tough conditions and in the coming year.
Panel moderator David Johnson, Account Director for Thomson Reuters Acritas, said that corporate law departments are under pressure to seek gains in efficiency from their outside law firms, but the firms themselves are also looking for more commerciality from in-house counsel, and a deeper understanding of their business so that legal advice is highly targeted and tailored to client needs.
Further, there are a number of challenges facing law firm leadership when it comes to delivering to these client expectations, Johnson noted, adding that Acritas data shows that while half of the partners interviewed thought collaboration had been unaffected by remote working, the majority of the remaining partners found collaboration had worsened. The proportion thinking collaboration had got worse grew to nearly one-third when exploring cross-practice collaboration as opposed to collaboration within one practice area.
Pressure and productivity
Remote working also appears to have had an adverse impact on productivity and the ability of juniors to learn on the job, and has been a challenge to developing new business as well. The data also showed that more than three-quarters of the partners interviewed want some of the changes in working practices to remain when we get to a new normal, such as more flexibility, fewer working hours, and less travel.
Panelist Brandon Ransley, Former U.K. Managing Partner at Dentons, explained how law firms have had to pivot rapidly during the crisis to respond to the extra pressures that their clients have found themselves under. Availability to clients has been critical, and that has been helped by partners being able to work remotely instead of the usual commuting and traveling. Of course, that comes at a personal cost and, like everyone, lawyers are having to find ways of managing remote working that balances work and their own well-being, Ransley said.
Another panelist, Paul Worth, Co-Head of Global Litigation at Eversheds Sutherland, commented that making this pivot has been easier where the client relationship reflects a trusted advisor status, adding that, in fact, some of these relationships have deepened through the period of adversity. Where it’s tougher is establishing new relationships and maintaining them in this virtual realm, Worth noted.
Technology had been put to the greatest test during this time, and for the most part has come through well, said panelist Joseph Raczynski, Technologist, Futurist & Manager of Technical Client Management for Thomson Reuters. Most firms have found the technology which has supported remote working and adoption has been given a major boost by the necessary changes in working practice.
And panelist Sid Welham, Chief Operating Officer for Holman Fenwick Willan, added that he has found it easier to accelerate the adoption of these technologies because the firm’s people have had to be so much more reliant on it.
Turning to the financial side, panelist Cecy Graf, Chief Financial Officer for Stoel Rives, said she has also seen aspects of change that could be interpreted as a consequence of “a good crisis.” For example, Graf said she’s observed a greater level of engagement from partners in financial management and metrics and really positive changes in partners’ behaviors, such as looking after the fiscal health of the firm as well as its clients. Partners have also been much more willing to discuss decisions around pricing and profitability, reflecting the pressures that clients themselves are under, she added.
Looking to the future
What will all this change mean to the legal industry going forward? Eversheds Sutherland’s Worth said his view is that working practices will be forever changed by this year’s events. For example, his firm has taken particular new approaches to work allocation, ended the reliance on where lawyers are based, he said, adding that teams are now being assembled from multiple offices to work on matters depending on the lawyers’ capacity and experience.
Graf applauded that approach, and said it should help preserve margins for law firms even when there’s pressure on fees. These longer-term changes are likely to have significant consequences for firms’ need for and use of office space, which also could amount to a big reduction in firms’ costs, she noted.
Worth and Ransley both mentioned the challenges law firms are facing in retaining talent in this climate. Indeed, “the phones are ringing hot” from headhunters looking to poach a firm’s people, Worth said, and that’s harder to defend against when people are remote. That means it’s likely that firms will have to invest in ongoing development of their people to maintain loyalty and a sense of team, he said. That development is especially a challenge for junior lawyers who are not getting the benefits of being in client meetings or around the office as they normally would.
Again, technology is being used to fill the gaps and provide for development opportunities as well as virtual meetings and working with clients, Raczynski added.
Dentons’ Ransley discussed the increased need for lawyers to engage with clients in a business savvy way, stressing the vital need for sector focus. He emphasized, however, that this needs to be drilled down to the specifics of each individual client. Worth agreed, saying every partner has to budget and set aside hundreds of hours a year to learning and understand clients’ businesses — and that this has never mattered more than now.
In fact, this has driven many U.S. law firms to move away from an “eat what you kill” compensation structure in order to incorporate more incentives for partners to develop sector and client knowledge, Graf noted.
All the panelist agreed that the crisis has provided challenges, yet has yielded opportunities too. For those law firms and corporate legal departments willing to embrace all aspects of the current pandemic that could make it a good crisis, there is now a chance to change the way in which the legal world has operated to the ultimate benefit of clients and firms alike.