The last five years have seen dramatic shifts in the practice of law worldwide: increased fee pressure from clients, a recent spate of mergers and acquisitions by global firms and a big shift in the technology sphere and online services market. As clients want more for less in a rapidly evolving marketplace, what’s in store for the legal profession in 2014?
With so much change on the horizon, it’s unsurprising that the 2014 Report on the State of the Legal Market by Georgetown University Law Centre and Thomson Reuters Peer Monitor concluded that the goals for most firms this year should be not to “build a bigger boat”, but rather to build a better one.
To help prepare you for the challenges ahead, here’s a look at what to expect in the legal profession for 2014.
Global mergers and acquisitions
Over the last two years, top Australian law firms have merged with international entities, setting their sights on emerging Asian economies to stand them in good stead to achieve growth over the next few years.
As mergers continue and practice groups are cast adrift as surplus to requirements, there have been unprecedented partner moves at top-tier and mid-tier law firms and there appear to be no signs of this slowing down in 2014.
According to Mark Herrmann, Aon Chief Counsel Litigation, mergers between firms will continue at their newly accelerated pace in 2014 with many lateral partner moves in the first couple months of the year.
With mergers and transitions in full swing, the Global Outsourcing Association of Lawyers predicts that new market players and innovators will disrupt the traditional legal services scene and try to reinvent the business model by developing new platforms for legal service delivery, allowing lawyers to focus on high-level advisory work instead of mundane or routine matters.
Use of smart technology and social media
Cloud computing, virtual conferencing, online dispute resolution, smartphones and tablet use, social media sites and lawyer apps – all of these are on the rise with a stronger focus on data security and streamlined processes for delivering legal work.
Consistent, targeted use of social media sites can reap huge benefits for Australian firms in 2014. As professional services consultant George Beaton noted in December 2013, with active bloggers and tweeters a firm can have several, even many, social media channels each aimed at specific target markets.
Smaller players can seize the opportunity to adapt to new technologies more quickly than larger outfits and offer competitive services to those clients who want high-quality lawyers without the price tag of the ‘Magic Circle’ sector.
Efficiency is the key to growth and opportunity in 2014. In a display of cautious optimism, the 2014 Client Advisory released by Citi Private Bank and Hildebrandt Consulting, predicts law firm profits will grow around 5 per cent in 2014, with stronger revenue growth and a “laser focus on efficiencies” easing pressure on margins.
For Australian firms, legal consultant Andrew Chen of Crowe Horwath identifies the key drivers of change in 2014 legal profession as improved operations, expansion of product and service offerings and improved margins through alteration of process. That means Australian firms need to think about partner headcounts, downsizing office space, cutting costs, outsourcing, investing in technology and automating routine tasks.
Flexibility, leadership and change
2014 calls for strong leadership and the ability to move with the times. In a challenging environment, firms must look at positive strategy changes and leaders should be proactive and progressive in their approach to the new order.
As Citi Private Bank law firm group chairman Dan DiPietro has said, “It’s a new day, and a new set of dynamics… has emerged. But we think leadership continues to evolve in their thinking and some firms at least are now getting out ahead of being in a reactive mode – saying let’s use this to our advantage, let’s go to our clients, figure out how to make this a win-win.”
In what’s set to be another difficult year for the Australian legal market, firms will do well to look ahead and be prepared for what’s coming down the pipeline. That means not lying down and waiting “for the steamroller of discounting and other nasties to flatten your firm” as George Beaton wisely says. To weather 2014, focus on putting the client first, address concerns about efficient and cost-effective legal service and look for greater business efficiencies, achieved through innovation, process improvement and new technology.