Michael Axe, Gardner Leader: The greatest risk for the legal industry is not adapting to the times

Charles Darwin’s famous theory on evolution rings true not just within nature, but business too. Darwin wrote that “it is not the most intellectual of the species that survives; it is not the strongest that survives, but the species that survives is the one that is able to adapt to and to adjust best to the changing environment in which it finds itself”.

Indeed, there is empirical evidence that shows how Darwinian the business environment is and how firms most competent in change have better long-term business outcomes.

Michael Axe, senior associate in dispute resolution for Gardner Leader, thinks that the inability for law firms to keep up with changing environments could be the greatest risk for the industry. “I think there will be a clear divide in the next 5-10 years between those who adapt, versus those who don’t. Those who don’t recognise the opportunities, or their clients’ changing needs, will be left behind. Not moving with the times is perhaps the greatest risk for law firms.”

Michael is a senior litigator with over 15 years’ experience of resolving commercial disputes for his clients. He has been recognised by both Chambers & Partners and the Legal 500 and was described as a lawyer who “leaves no stone unturned” by the Legal 500. He was awarded professional negligence lawyer of the year 2015 by Corporate LiveWire Global Awards.

Michael identifies three forces which are posing strategic challenges for law firms, to which firms must adapt to in order to survive and thrive.

Rising property costs

Nearly all solicitors require strong relationships with their clients, and strong relationships are built by excellent communication. However, with advances in technology, the traditional methods of client management are under question.

“More and more law firms are questioning their property costs, especially in central London. What are the benefits they and their clients are receiving from such expensive offices? We’re now able to video call with our clients, sign digitally and transfer large documents easier than ever and as a result, the physical location of a solicitor’s office is becoming less of a priority for clients.”

This, of course, doesn’t and shouldn’t completely replace face-to-face meetings, however, technology enables us to increase efficiency and client satisfaction levels.

“Law firms are beginning to question the cost-effectiveness of spending large parts of their budget on expensive office locations.”

Perhaps even more importantly, sometimes the clients question the cost-effectiveness too.

“Anecdotally, when I worked in central London, I heard some clients say, “I can see where my fees are going”, referring to their solicitors’ extravagant offices. They understand that part of their fee pays for the actual legal services, but that part effectively goes to paying for the firm’s premises. These clients are now beginning to look outside of London for firms who don’t have these additional costs, as those savings are passed directly on to the clients. It’s more cost-effective for clients, and they can trust that they are still getting the same quality legal advice but for a fraction of the price.”

Cost-sensitive clients

You could argue that the financial crash a decade ago had a lasting impact on the attitude to spending and cash for businesses, and when consumer-behavior changes, so must the businesses that serve them.

“I think since the economic crash, clients are more aware of their legal spending and place greater emphasis on receiving better value for money. For example, I was city trained and then moved to a regional firm, and there are many other lawyers who followed this pattern for reasons such as lifestyle. Now, clients are realising that they can get city-level legal advice for regional-level costs.”

“Decades ago, there was probably a view amongst some clients that if you selected the most expensive lawyer, then you’ve got the best lawyer, and therefore you’ve made the best decision. I don’t think that’s the case anymore. Instead, it’s about where clients can get the best value.”

As with any industry then, market forces are driving firms to deliver the same or better service for a more reasonable price. For lawyers to deliver this, it means they must find better ways of working to increase operational efficiencies, or justify their fees to their clients, and not just themselves.

Utilising technological opportunities

The final key market force is technology, and how it not only affects firms operationally but client expectations too.

“Clients want the peace of mind of knowing that their matter is being handled by a lawyer they trust, but they’re unlikely to be concerned about where the lawyer was physically sat when the work was done. The greater flexibility offered by remote working, with time-saving technology, is having a big impact on the way lawyers can use their time more effectively. If I look back to five years ago, the biggest change to working practices has been increased flexibility and remote working.”

“Even more recently, we’ve been in the process in moving towards paperless case management. We’ve just carried out our latest review to see just how streamlined we can get. And with the exception of court documents, original client papers and the like, we can now pretty much get rid of paper files. That’s largely been thanks to improved case management systems. You don’t need the safety blanket of paper files anymore.”

Technology today is readily available on the market and economically viable for law firms to digitise their processes. However, it is probably now only prohibited by people.

“Culturally across the legal industry, there’s been an inherent apprehension about working away from your desk, whether it’s flexible hours or locations. But the more progressive firms are adopting it. While you need to have proper safeguards in place to maintain client confidentiality and cybersecurity if working remotely, the bottom line is that you either trust your employees or not – after all, they can skive off at their desk just as easily as at home. The more progressive firms are probably now finding that their employees are more productive, rather than wasting time commuting, for example. They can start working when they’re ready.”

Through rising property costs, the diminishing need to be in the office or travel all the time, increasingly cost-sensitive clients and the opportunities in technology, the traditional working methods of law firms may find decreasing success. As Michael mentions “the greatest risk for law firms is not moving with the times”.

Indeed, to repeat Darwin, “the species that survives is the one that is able to adapt to and to adjust best to the changing environment in which it finds itself”. How firms adapt to changes out of their control may prove to be very telling of their future success.

Thank you for this, very insightful

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