Law firms, large and small, are on the precipice of the most significant period of change to hit the legal sector.
Big name clients and solid results are no longer enough to remain competitive, with client demand, changing expectations of staff, and the advent of new technology and ways of working driving business transformation across the board. If you’d like to read more on this, check out my previous article: 3 reasons why law firms need to invest in change.
Despite the growing pressure for law firms to transform the way they operate and deliver legal services, the industry is still at the early stages of the change cycle and face multiple challenges delivering tangible transformation benefits to clients, staff and the business. This article looks at several of the key challenges facing transformation within law firms. Of course, each firm will have a different starting point, and a different journey depending on many factors such as client-base, industry specialisms, geographic spread, ambition and strategic vision. Some firms are figuring out what they need to do to remain competitive and relevant, whilst others are determined to be the pioneers of the future law firm. Despite this, these are the most common transformation challenges facing them all.
1. Finding the motivation for change
I do not want to get into a debate about how much or how little the legal industry has changed to date, suffice to say that law firms continue to grow in profitability, whilst operating fairly inefficiently, with a reasonably low demand for change. Change does not happen unless there is a motivation, not simply a rational case for change, but a ‘what’s in it for me?’ emotional reason. Finding that motivation within law firms is made harder by the change maturity of the clients, the partnership model encouraging autonomy rather than top-down management, and the complexity and established protocols of legal work. Every innovation and change initiative needs purpose, sponsorship and benefit. It is one thing buying a new technology, or investing in a new capability, it is quite another challenge to drive take-up and adoption.
Key places to find motivation for change;
- Individual clients – proactively work with clients to offer innovative solutions to their business and legal issues.
- Market pressures – identify market changes that require a response, such as new entrants, falling prices, new technologies.
- Competitive advantage – find new value and revenue opportunities, that often emerge from new technologies and capabilities being combined with your own unique insights and know-how.
- Talent retention and attraction – a growing motivator for change lies in the need to attract and retain top talent throughout the organisation, in a market where the needs of the workforce are changing; flexible working, career breaks and progression, new skills and roles, engagement in collaboration and innovation, as well as up-to-date technology and an innovative culture.
- Regulatory change – sometimes you just have to do it, although the trick is to make it easy for people to comply.
2. Building a change culture
This one is more difficult to articulate, as it covers many tangible and intangible elements within a firm. The difference in a firm that is really committed to change and transformation is in the fabric and culture of the way the firm operates, from staff engagement and encouragement of ideas and initiatives, the design of new offices and the clarity of the business strategy, to the structures, skills and governance in place to deliver change.
Focus areas to kick-start a change culture;
- Strategy – whether at business, division, function, or country level, there is a need to articulate what is important for the future of the business. Not always easy to do, but the process of creating a strategy will help to clarify where you are now, how far you are willing to go, what the critical success factors are and where the opportunities, threats and priorities are. This equally applies to the positioning of the global business, to the challenges facing a particular practice area or geography, as well as to the technology, HR, marketing or innovation functions.
- Engaging all staff – I would advocate an explicit approach that encourages all staff to engage in innovation and change. At my last firm, this was a crowd-sourcing ideas platform where we ran innovation and improvement challenges both globally and locally. However, like all things, this type of approach must be visibly sponsored by the local and global leadership and must lead to tangible outcomes that are communicated across the firm. The best approach is to ask for volunteers to get involved in shaping and delivering the best ideas. A clear process is required to evaluate ideas, prioritise and provide funding and resources, otherwise the initiative will quickly fall into disrepute through lack of action.
- Prioritisation and governance of the change and investment portfolio – in many industries the planning, prioritisation and governance of the change portfolio is an established capability. However, in law this is often quite immature, yet is essential to prevent a proliferation of fragmented initiatives that are competing for the same scarce funding and skills (such as IT project resources), as well as to provide focus on actually delivering benefits.
3. Invest in new capabilities
One of the critical transformation challenges is to help lawyers change the way legal work is delivered, through adoption of new technologies and new roles such as legal technologist, legal project manager, process designer, or resource manager.
The need for these new roles quickly becomes clear when you go into a firm without any of them. These new roles bridge the gap between lawyers doing legal work, and support staff providing the business infrastructure. Sitting close to the lawyers, these roles directly work with them to deliver the legal work in a way that provides greater value to clients, through understanding the work, sharing best practice, driving adoption and take-up, and providing professional expertise in the non-legal elements of the solution. As the legal industry changes, and routine work is increasingly automated or eliminated, clients will expect much greater collaboration across multi-disciplinary teams to deliver the solution, and this is the beginning.
Capabilities to create value for your firm might include;
- Legal technologist – not an IT specialist, rather someone who understands how the legal technologies can be used to support legal delivery, what best practice looks like, and how to drive adoption.
- Legal project manager – often a dedicated role on large, complex matters, where there is real value in professional project management rather than an expensive senior lawyer trying to do the best job possible. On the largest matters these roles are becoming chargeable to the client as the value is clearly visible. On smaller matters LPMs can help pricing, resourcing, planning and client reporting. LPMs can also lead training initiatives to up-skill the legal community and introduce the role of project manager more widely.
- Process designer – there are limitless opportunities to improve the way legal work is undertaken, and re-designing the end-to-end process can identify ways to eliminate and simplify the work, and use technology where applicable to automate. This delivers lower production costs, often vital in low margin fixed price work. This process design capability is also attractive and offers a valuable service to key clients.
- Resource manager – other professional service firms have long ago professionalised the way that expert staff are allocated to projects to maximise business benefits as well as match the development needs and ambitions of the individuals. The legal sector is now moving in this direction with the increasing introduction of the Resource Manager role, supporting partners and individuals to ensure the right people areinvolved in the right work. This approach brings benefits in talent recognition and development, utilisation management, and improved integration of people returning from secondments or maternity/paternity.
- Innovation leader – a new role with many different remits, these specialists are involved in leading the challenge of engaging the wider organisation in innovation and ideas. Often includes supporting some type of innovation committee, and may involve running incubators, hackathons and crowd-sourced ideas platforms.
- Data scientist – law firms hold a unique set of knowhow and data, from time recording and activity, to best practice contract clauses and insights. With the increasing availability of Artificial Intelligence and computing power, firms are recruiting data scientists to create client and business value out of the data held within the firm.
Change for law firms can seem like a leap into the unknown without the right expertise in place to own, shape and run the transformation. But with this help, firms can stay ahead of the competition as well as abreast of everything evolving in the industry, making the right decisions when it comes to technology and building a new culture fit for the future.
If you’d like to find out how Hydrogen Group and I are helping law firms to understand and implement change, please get in touch with me.