by James Paterson
A growing pile of research, data and reports suggests cultural shifts along the path to compete for, win, and retain law firm business. Fierce competition, including from the buyer themselves, is the number one barrier to law firm growth.
Industry experts believe these changing priorities are a result of changes in the way companies purchase legal services, driving firms to look for new ways to sell and market their legal services.
Lawyer’s Weekly Canada reported Supreme Court of Canada Chief Justice Beverley McLachlin explained to a legal conference:
“It’s clear to me that the profession has to change. So unless we actually change and learn to deliver in alternate ways and harness the use of technology so we can do things faster and more efficiently and at a lower cost, then we may out-price ourselves in the market.”
In light of these shifting priorities, here are of five business development trends making a dent in legal marketing series:
Rise of the Indispensable Firm
Relationships are the center of gravity in the client-law firm partnership, but firms are beginning to realize the nature of the relationship is evolving. This consciousness is shaping the way GCs evaluate legal services, according to BTI Consulting:
“The new generation GC is tasked with translating legal risk into business risk. They need to anticipate questions about business implications and maybe even stock price. You will be expected to study their company’s business like they studied you before hiring.”
Today’s in-house clients express a strong inclination for law firms that understand their business on a profoundly deeper level, including:
• Spot and identify unforeseen challenges, risks and opportunities, the legal department is not yet aware of and offer solutions
• Be proactive, versus reactive
• Be fiercely efficient on the front and back-end, of the business
• Be transparent and flexible about pricing and staffing
AFAs as a Competitive Advantage
Billable hours approaching $1,500 have captured headlines of late, but a report published last fall crunching $18 billion in legal invoices suggested this trend has been underway for some time:
“Median partner rates at the “Largest 50” law firms – those with more than 750 lawyers – rose to $711 per hour, based on 12 months of data ending June 30, 2015. That number is up from the last report where median partner rates came in at $675 per hour for the 12 months ending December 31, 2014.”
The timing seems opportune for law firms willing to embrace the means to implement AFAs profitably – in a framework of value as opposed to cost.
“For law firms, AFAs are an opportunity – an opportunity to improve efficiency and differentiate from the rest of the market,” according to Russ Haskin, writing about alternative views for alternative fees for Law Practice Today, a publication of the ABA Law Practice Division:
“The legal industry by nature is risk-adverse – nobody wants to be first – but those willing to embrace change sooner rather than later stand to gain a long lead that will be challenging for competitors to close.”
Data from the 2015 CounselLink Enterprise Legal Management Trends Report indicated AFAs are more than an over-emphasized headline – more and more legal departments are experimenting with alternative models.
While the percentage of matter sand billings structured under AFAs remained flat, the study revealed “the overall number of legal departments actively engaging in AFAs grew sharply, to the tune of 76%, up from 59% in the previous year.”
Revisiting Staffing Models
“In 63% of law firms, partners aged 60 or older control at least one quarter of total firm revenue, but only 31% of law firms have a formal succession planning process,” according to the 2015 Law Firms in Transition study by Altman Weil.
However a transformation in staffing in some firms may already be underway. The 2014 Year-End ELM Trends Report (published in early 2015), found the 50 largest US law firms were evolving their staffing models, particularly in IP litigation matters.
The data demonstrates the largest firms are reassigning portions of IP litigation work to more junior (yet capable) partners in order to meet client demands for lower cost. As a result of this reassignment of resources, the nation’s top 50 firms, have grown IP litigation market share from 36 percent in 2011, up to 61 percent at the end of 2014. As clients demand more efficiency and lower cost, it appears, even the country’s largest firms realize what is at stake.
The effects can also be seen in law firm marketing and business development organizations. A 2015 survey of 400 legal marketing and BD professionals, conducted by the LexisNexis InterAction team, found consensus that new business development strategies have shifted but wide variation in how to best structure law firm marketing departments for success.
Investment Flows to Thought Leadership
The aforementioned survey – Law Firms in Business Development Transition – indicated a majority (63%) of firms plan to beef of their thought leadership efforts this year. More than half of those firms (53%) also plan to invest in blogging and content marketing.
As firms bulk up on thought leadership and content marketing efforts, experts caution, effective thought leadership requires equal parts attorney participation and engaging content. In other words, true thought leadership needs to include a steady stream of differentiated and engaging content.
The Rise of Law Firm Sales
The word “sales” has slowly, albeit steadily, slipped into the law firm lexicon. As a result, the industry is observing the rise of the sales-focused law firm CMO or dedicated Chief Business Development Officer (CBDO). These positioned are being augmented with experts from outside the legal industry who are bringing more recourse process and structure to the law firm BD process.
More than three-quarters of law firms report having a business development function in place though there is considerable variation in how those functions are organized:
• 26% report marketing and BD are separate but equal organizations;
• 23% say BD reports to marketing;
• 29% say marketing reports to BD; and
• Just 23% of firms say they do not have a BD function.
This trend is having a second order effect: it’s driving the addition of sales support and pricing strategists who are tasked with evaluating BD expenses and ensure the function is driving revenue for the firm.
The business of law, including how law firms attract, win and retain business has clearly changed. It’s the evolution of how service providers in this space evolve – people, process and technology – that’s going to get very interesting.
• James Paterson is the vice president for LexisNexis Large Law Practice Management Solutions.