As we enter the second quarter of 2021, the picture looks fairly rosy for many law firms. Preliminary signs point to the potential for another growth year in terms of demand across a number of practice areas. Signs of increased demand, combined with strong 2020 financial performance, indicate that some firms are poised for material revenue and profit growth and the potential to leapfrog competitors over the coming years.
Succession of client relationships is a top-of-mind issue for many law firm leaders. Yet it remains a challenge for leaders to make meaningful progress, often because partners resist succession efforts. In some cases the resistance is for legitimate reasons, but in other instances it is based on myths. Our work with law firms and our interviews with the clients of law firms highlight many of these illusions.
Declining leverage is not a new problem for law firms. Over the past 10+ years, partner leverage has declined, and many firms have gradually, and sometimes unintentionally, shifted to a partner-heavy model. With the advance of non-traditional providers who often have a highly leveraged model, and intensifying client pressure for firms to improve efficiency, the time is ripe for firms to rethink and better organize their leverage model.
Making predictions for the year is always risky. When we made our predictions for 2020, we never anticipated that we would have the kind of year we’ve just completed. To our credit, we did predict that firms would need to be prepared to manage in headwinds, and that enhancing leadership diversity and reducing bias would be important priorities for law firms. Each of these turned out to be true, although we didn’t imagine the degree to which they would dominate the agenda for firms in a challenging year on so many fronts.
The legal industry has proved remarkably adept at adjusting to the Covid-19 pandemic and the economic shocks it continues to unleash. We’ve seen firms quickly turn themselves into virtual operations, continuing to deliver high quality services to clients both efficiently and profitably, with renewed commitment to health and wellbeing.
At the same time, the crisis has accelerated the macro trends that drive the business agenda of clients, highlighting growth opportunities and areas of risk that must be mitigated to ensure long-term success.