Our series of in-depth "State of the Markets" reports over the last year clearly showed how issues of talent and technology continue to alter the landscape for professional services firms
The past two years have been a defining moment for much of the legal and corporate market. Fresh out of the worst of the global COVID-19 pandemic and its related shutdowns, many businesses and law firms have struggled to redefine what their new working normal will look like.
To that end, the Thomson Reuters Institute, along with key market partners, have published a series of in-depth State of the Markets reports over the last year that examine several different aspects of these markets and offer insights into how many organizations are adapting and what solutions are being successfully utilized. The idea behind these State of the Markets reports was to provide readers with an understanding of how their peers in law firms and corporations are implementing transformational change within their own organizations, suggesting ways that other firms and department leaders could innovate in order to best prepare for the future.
In the legal market, our flagship Report on the State of the Legal Market, published each January in partnership with the Center on Ethics and the Legal Profession at Georgetown University Law Center reviews the performance of U.S. law firms, breaks down the factors that drive firms to take a longer-range, more strategic view of their market positions. In the 2022 Report on the State of the Legal Market, we saw that the legal market has remained resilient, even though numerous key challenges remain for many law firms, such as a hot market for legal talent that has driven up costs.
Yet, the report showed that many law firms have managed the difficult market with a good level of success last year. For example, demand for legal services soared in 2021, and even exceeded pre-pandemic demand levels in some practice areas. Law firms also sought to boost profitability by raising their billing rates aggressively, which helped to secure another year of strong profits for many law firms.
When we break the legal market down, either by size or region, we can offer readers even more valuable insights into how many law firms are managing their challenges.
Our 2022 Report on the State of the Midsize Legal Market, for example, detailed how the midsize law firm segment, while not immune to the volatility experienced broadly in the overall legal market over the past several years, seemed to have staked a position going into the latter half of 2022 that finds them better positioned relative to the rest of the market, including their larger competitors.
One way they’ve been able to fare better — especially in terms of talent retention — was by leveraging their firms as being a desirable place for attorneys to work, even if the pay scale is less than at larger firms. The strategy paid off, and attorney attrition in midsize firms was less than in other sectors, demonstrating that, at least for some lawyers, a good working environment is about more than just money.
You can explore our top trending Thomson Reuters Institute insights that shaped 2022, or you can relive some of our highlights from this year here. And for further coverage of the legal, tax & accounting, corporate, and government sectors, visit the Thomson Reuters Institute.
Similarly, in the small law firm and solo practitioner segment, leaders voiced a general sense of optimism and expectations of future growth, despite an uneasy economic picture, according to the 2022 Report on the State of US Small Law Firms, published this month.
Interestingly, when we looked at other legal markets around the globe, we saw many of the same trends and challenges as in the U.S. market, but with a different emphasis. For example, the State of the UK Legal Market 2022, published in April, detailed how strong client-driven pressure was forcing law firms there to address issues ranging from demonstrating their value to offering tech-savvy solutions. And in the Australian legal market, the 2022 Australia: State of the Legal Market Report illustrated that some of the same downward pressure on legal demand experienced there was now being felt in the U.S. market in the latter part of this year.
The Thomson Reuters Institute State of the Markets reports also look at the other side of the table, examining what corporations are doing to better manage their internal law and tax departments.
We found both departments facing immense pressure from their parent company to transform the way they operate, with special emphasis on working more efficiently and cost-effectively. Indeed, coming out of the COVID-19 pandemic, it appears the dramatic shifts in workflow processes that corporations undertook during that time – especially in working environments – may only be the beginning.
For instance, in the 2022 State of Corporate Law Departments Report we looked at how the dramatic shifts that law departments endured during the pandemic could kick off a larger transformation. The corporate response to the COVID-19 pandemic of embracing to a large degree what they saw as unavoidable change has left companies with a desire to capitalize on those changes and make them a permanent part of their daily business.
In the report, corporate law department leaders surveyed looked to be getting the message, ranking conducting operations efficiently and delivering legal work more effectively among their top priorities going forward. The report showed that the most successful law departments will be those that leverage the momentum of the change forced on them over the past two years, both in how they integrate and operate within their organization.
Similarly, the 2022 State of the Corporate Tax Department Report showed how the twin trends of technology and the war for talent are impacting how corporate tax departments are operating. Specifically, the report examined the strong tension between corporate tax departments seeking greater effectiveness and efficiency through technology, and tax professionals in those departments who are constantly being asked to do more, while working faster and with fewer resources.
Corporate tax departments were far from alone in facing this challenge. Many law firms and corporate law departments began to grasp that the technology needed to meet the growing demands of the digital economy is pulling them in several directions at once, making technology adoption and its use simultaneously one of the biggest challenges and most promising opportunities organizations are facing.