As we move into Q4 2022, we have looked at some of the key challenges facing commercial law firms as they look forward to 2023.
The number 1 challenge for commercial law firms continues to be the recruitment and retention of key talent. The Law Society (lawsociety.org) recently noted:
"'The Great Resignation’ is in full swing and firms need to offer more than just high salaries to attract and keep talent. A positive culture, flexible working and systems which support – not hinder – staff are vital"
A recent 2022 report from LexisNexis Bellwether highlighted that:
"49% of surveyed commercial law firms cited attracting and retaining good lawyers as their biggest challenge for 2023"
The same report noted that 45% of solicitors surveyed felt that looking for better work/life balance as a core reason to move firms.
What are law firms to do with this data? To attract and retain the very best people, your firm must look to build a strong employer brand which captures all that your firm stands for in the eyes of a potential recruit? This involves more than just being ‘a great place to work’. Your employer brand must capture and communicate the career, culture and community opportunities which make your firm a good fit for certain candidates. Your firm must aspire to standing for certain values that will align with the type of candidates you are looking to recruit. Again it has to be deeper than values of ‘honesty, trust, partnership, innovation etc’ – which are fine values in their own right, but will almost certainly be held by every other law firm! And an opposite corollary of this must also be accepted, that in defining what characteristics your firm has that make it outstanding, you may also be closing the door on other types of candidates who do not identify or align with your firm's outlook.
Your employer brand should reflect your core brand vision and values. It should also look to build a specific reputation so that target employees can understand how they can forge a successful career with your firm - what the culture will be like, whether it align with their personal values, how your firm will collectively contribute to the broader community and society etc.
Your Employer proposition should outline the performance and behaviours you expect and the rewards an employee will receive for their commitment. This will become the core of your value proposition for your people.
Finally, the experience of your people will become the reality of your employer brand, which will align with and reflect your value proposition and will feed back into your employer reputation. Firms should be taking a long-term approach to building positive, strong employer brands which can deliver positive employee experiences – you cannot fake this, you have to make it happen.
All firms need a steady stream of new business in order to grow. The LexisNexis Bellwether 2022 study highlighted that:
"Referrals are still the main source with some firms citing an 80% conversion rate"
But referrals, while very valuable, are not bringing in the volume of new business required. The reality of using word-of-mouth as a marketing strategy is that it isn’t a marketing strategy at all. Every firm should invest in relationship marketing, but in isolation, it is not enough. Firms need to take more control of their new business stream and the right digital marketing is the pathway to deliver this.
LexisNexis Bellwether highlighted that:
"48% of firms surveyed reported that attracting new business was their second biggest challenge for 2022/23"
Digital marketing spend must be increased. Recent studies have shown that Google is still the number 1 source for businesses researching how to select a commercial law firm. Your firm MUST have a digital presence that will engage and help prospective clients identify your firm as a potential partner. This should include:
You need to build your digital word-of-mouth credentials - build out a social media strategy and presence and look to engage in industry groups where your voice can be heard within different digital chatrooms.
The mistake which many firms make with their online marketing is that they look to constantly sell. The key is to look to use these digital channels as a means to grow relationships with your target audience through valuable content that helps to solve pain points and ultimately steer these targets towards your firm as a solution provider. Finally, all of these strategies require firms to examine the types of clients they want and to build a marketing and acquisition strategy around their characteristics and needs (their personas).
Linklaters senior partner Aedamar Comiskey recently stated in an interview that:
“Agile working in a profession that has been built on a training-on-the-job process will be the most enduring change. Agile working is a change for the better and we have to be innovative and disruptive in our thinking to ensure we match or better the way we learn and work together. I think this will bring new truth to Drucker’s maxim that 'culture eats strategy for breakfast' and it will be those firms with the best and, indeed, most agile cultures that will win”
Many firms are putting hybrid culture firmly as a top priority:
“It’s difficult in a hybrid working environment, but the cultural piece is really important and we’re investing a lot in ensuring that it’s maintained”
Firms need to grasp both the threat and the opportunity of developing a hybrid working culture. How can the core values of your firm be maintained and enhanced in this new hybrid model? Can your values be maintained? Or do they need to be re-examined within this new framework? How can you brand help direct these challenges? And how can you use your approach to hybrid working as a way of differentiating your offer both as an employer and as a partner to your clients? Have you got the right applications to not just manage client business successfully but to have your people stay connected with each other?
A recent Reuters Insights In Action article highlighted that:
“Law Firm Managing Partners are convinced that there are losses emerging as a result of prolonged working from home - that recent junior staff have never absorbed the norms of team-working in person. More worrisome, these junior staffers are not naturally picking up the trade, and some firm leaders think this has made it necessary for firms to become more intentional about learning and development.”
Clearly there are challenges that exist for firms. For example, how do you help younger staff to learn their trade whilst allowing all staff to work from home and avail of a better work/life balance? Creating a balance between in-office and at-home working will define the short-medium culture challenges. Creating a positive hybrid working culture will also reflect heavily into a firms employer brand reputation.
In order for your firm to ensure people continue to develop professional competencies throughout their career, you need to identify and review your lawyers learning needs. Focus on the development areas that will have the biggest impact on your growth strategy. For example it could be building deeper knowledge for existing clients sectors or it could be to develop new areas of expertise based on target sectors for your firm.
"27% of client firms cited in a Reuters report 2022 noted that they value 'Technology, Digital/AI skills' as high on their wish list for law firms services. With 28% citing 'knowledge of clients’ business being their number 1 wish"
Fee earner burnout – getting the balance between earning fees and happy productive long-term employees continues to be a challenge for law firms. Mixed into this is the continued demand for service levels from clients.
“58% said that clients are more likely to expect the same or a greater level of service for less than they were 12 months ago” (Reuters)
Firms have to be better at supporting their colleagues and recognising that there are times where they will need additional support. Education is required about how to navigate stress individually and as part of a team. Wellbeing schemes to help raise awareness of the issue and help to alleviate stresses should be introduced. They can also help to enable a culture where these issues can be tabled and discussed in an open, honest manner. Work practices can also help – for example, a 'no email' policy after a certain time or including direction on when it is ok to respond to a request, can help to alleviate pressure. Ultimately it is about the type of culture you want to create. Your firm can be high performing but also empathetic. It is in nobody’s interest to have colleagues who are constantly stressed leading to burnout – not good for the person, the firm, its reputation and certainly not for good client service levels.
LexisNexis Bellwether 2022 noted that: "Keeping working practices and systems up to date is the most significant threat to small law firms, with four-fifths of respondents (81%) listing it as a quite significant or very significant threat."
Reuters “State of the UK Legal Market 2022” notes that the ability to leverage new legal technologies to improve efficiency or enhance the department’s effectiveness was also was a top concern.
“One-fifth of buyers (17%) noting the challenge of digitalisation and other technological issues”
“For a long time now, ESG has been topping every peer’s — and client’s — agenda, but recent events such as COP26 have reinforced its importance and made it the subject on everyone’s lips,” says head of Freshfields Bruckhaus Deringer’s London office, Claire Wills.
A recent study by legal services provider DWF highlighted that:
“40% of companies found it difficult to hire talent because of a perception that their ESG policies are weak”
It’s very clear that top talent expect businesses to deliver on ESG – and if they cannot see it, they will not engage. Firms should be looking to bolster their ESG expertise - from an in-house perspective and also in relation to the advice they can offer clients in this area.
Putting your clients at the centre of your practice and building your services around their needs should be at the core of how you offer your services. Rather than simply providing 'Our Services', firms should be building solutions around client focused propositions.
Reuters highlighted the fact that firms recognise the gap in relation to their growth ambitions and marketing spend, but are reluctant to break out of their traditional approach.
Most law firms are still under-allocating resources and spend to marketing, yet talk about attracting and retaining the best talent and acquiring new clients as a major issue. LexisNexis Bellwether 2022 highlight the division of spend across law firms as:
For firms looking for revenue growth, a 5% allocation to marketing will not bring success. Hence committing to a long-term marketing driven growth strategy will represent significant innovation for those firms that can grasp the investment:growth ratio opportunity.