Legal’s pressing opportunity to advance the new normal: strategic focal points
What began as a temporary disturbance to how companies and law firms operate has all indications of settling into a “new normal.” As a result of the pandemic, law department and law firm leaders have rapidly implemented business continuity strategies, reviewed operations and explored cost containment methods to stabilize their organizations. It can be tempting to stop at “steady state” and do enough to navigate the moment. However, leaders who embrace current changes, creatively frame new opportunities and adapt their organizations for the new normal will emerge stronger and better positioned coming out of this crisis. Outlined here are several focal points that should be on the radar of progressive leaders seeking to turn this challenging time into an opportunity and a strategic advantage.
Those who experienced the last economic crisis know that tremendous price pressure on law departments and law firms led to greater business discipline, transparency in law firm financial management, enhancements to operations and more creative pricing. We believe the current pandemic and associated economic pressures will lead to another burst of operational advancement and service delivery alignment.
As a result of the 2009 crisis, law departments formalized and rapidly evolved legal operations functions, giving rise to strategic and technological advancements that persist today. These initiatives included re-evaluating their allocation of legal work to the right internal and external resources, consolidation and structuring of outside counsel panels, as well as operational improvements to better manage internal work and better understand and govern legal fees. Law departments deployed new or upgraded matter management systems and business intelligence technologies.
The law firms that emerged most successfully from the 2009 crisis were able to shift their focus from “business as usual” to streamlining back office efficiency and improving their pricing approaches and delivery techniques. Many firms created new C-level positions to focus on emerging areas of focus, and some hired experienced C-suite executives from outside the industry to bring fresh perspectives and business management rigor.
Today’s environment will have a similar material impact. Pressures on corporate law departments will increase, perhaps significantly for a time, and competition among law firms will likely become even more fierce. To succeed and emerge stronger, legal organizations must enhance alignment in multiple crucial areas: alignment with client value; alignment of internal strategy; alignment among teams and adjusting to extended remote collaboration; and alignment with processes to optimize cross-organizational efficiency. Law departments and law firms that calibrate along these key dimensions and further transform how legal services are delivered will emerge stronger and better positioned coming out of this crisis.
Aligning with Clients
Of course, law departments are seeing pressure to reduce costs. We are also hearing from law departments that COVID-19 is generating greater demand for both routine and novel, pandemic-related work, as well as slowing volume and pace in other areas. We expect businesses are leaning on law departments to prioritize critical work, align budgets (and perhaps scope) on less critical matters and resolve as many matters as possible to free budget to address new legal challenges. Law firms are already experiencing the near-term ripple effect through law departments renegotiating payment terms and requiring real-time budget-to-actual reporting. HBR expects the next stage of considerations will include unbundling work, rethinking the work they assign to lower cost firms or other service providers and perhaps shifting more work in-house.
Now is the time for law firms to step up their efforts toward new and creative client-oriented initiatives, joint design projects or the implementation of creative pricing structures. Those law firms nimble enough to adapt in real time to these changing needs, who meet their clients in the trenches to creatively deliver cost effective services, who apply technology to solve immediate business problems, and who facilitate transparent real-time collaboration will increase their chances for winning and retaining work and forge a bond that extends beyond our current moment. The call to action for law departments and law firms is to embrace the present work environment and use it as an opportunity to design sustainable new modes of delivering legal services.
Aligning with Internal Strategy
Depending upon their industry sector, it is likely that law department strategies are rapidly changing. The consistent themes, however, are cost reduction, early resolution of legal issues and disputes where possible, and rethinking or tightening their provider panels and resource allocation in an effort to increase their negotiating power and better manage their portfolio of legal work.
As law firms contemplate strategies to navigate potential financial challenges, their initial instinct may be to further scrutinize those practice areas that have struggled to meet their firms’ financial expectations. Before making a decision that can lower morale, reduce revenue and potentially sever the provision of an otherwise valuable client service, firm and practice leaders should first consider optimizing those practices to help them become more financially viable. Techniques that are new to or not commonly adopted by law firms, such as alternative staffing and fee models, automation, process improvement, service design and practice-specific technology, can help accomplish that. By focusing on these challenged practices now, firms may be able to avoid later having to prune practices with latent potential. Time may be of the essence, however, as revised operating and delivery models may be key to the success of some practices as the economy emerges from the pandemic.
Aligning Teams for Extended Remote Collaboration
Companies and law firms across the country have gone from considering remote work optional to entirely virtual operation in a span of days. The ordinary delivery of legal services is being stress-tested from every angle, and necessity has completely upended the stereotypical resistance to change. We anticipate that legal organizations will need to progress from this short-term adaptation to a long-term, continuous evolution of their remote and digital collaboration and legal service delivery models. Beyond an extended need for social distancing, a flexible work environment can promote greater team satisfaction and improved client partnerships. The extreme remote working environment of the present will leave a permanent mark on individual and collective work styles and elevate the expectations of what is possible. We urge law departments and law firms to embrace the adaptability that individuals have shown during this time and consider which elements of this new working environment should persist when the crisis is over.
Process and patterns are inherent in everything we do – from the business of law to the delivery of legal services. The current extreme remote working environment and new financial stress create a need and opportunity to redesign the interactions and mix of people, technology, client experience and data to drive efficiency and produce higher value outcomes. Optimized processes can inject the right level of expertise at the appropriate junctures; leverage technology to advance progress and generate meaningful data; and drive efficiency and tangible value to create a distinctive client experience.
The biggest difference between today and 2009 is that we are all in this together. Literally, everyone, on personal and professional levels and across industries, is touched by this moment. As we navigate our days trying to stay safe and healthy, legal organization leaders are focusing on instilling confidence, creating a sense of purpose and shared goals, managing fear and uncertainty, and preparing their teams for a better future. When the dust settles, those law departments and law firms that rapidly align internally and with their clients to creatively address their new challenges and changing preferences will emerge primed to deliver superior value and compete in the new market.