It’s a storyline that won’t come as a surprise to law firms: Clients want to reduce legal spend. But amid an economic downturn, efforts to cut costs and save money are amplified, and these days the options for assistance extend beyond calling outside counsel. In other words, there are more players, providing more options at scale, and for less money.
These services are often referred to as alternative services and traditionally include things like document review, contract management, electronic discovery and IP management. Law firms have taken a variety of approaches when it comes to competing and winning new business in this environment. Some are simply doubling down on their most profitable work, leaving this type of discrete work to ALSPs. Others have jumped on the trend of disaggregation, launching their own suite of alternative services as part of or apart from their current business. In fact, according to a recent study, 35 of the Am Law 100 firms have launched their own captive alternative legal service providers.
Meanwhile, a growing swath of firms is looking to leverage external expertise to help boost efficiency and productivity in other ways, and to help inform strategic decision making. This group is taking a step beyond e-discovery and contract management, enlisting the support of advisory firms (and in some cases, building that expertise internally) to help transform the way legal services are provided. Included in this suite of services are things like strategic planning, cost management, pricing and profitability analysis, and marketing and business development support.
It’s not that consulting within the legal industry is a new concept (Eversheds Sutherland’s consulting arm generated GBP26 million in 2017), but as COVID-19 forces changes to the way companies do work, law firms can benefit from being supple and innovative.
Earlier this year, for example, law firm advisory company Elevate announced that Hogan Lovells would implement Elevate Project, a cloud-based pricing, budgeting and project management application, to “help the firm’s lawyers and legal project managers collaborate with each other and their clients on ongoing matters.”
On the heels of that announcement, in October accounting behemoth KMPG announced they’d be offering a new legal operations transformation service. KPMG noted that while “the move to digitize and automate the legal function was already underway before COVID-19, it is now a commercial imperative, and the scope and remit is wider than before as the pandemic situation has intensified the need for organizations to transform.”
In addition to some of the traditional services offered by alternative legal service providers, consider these ways advisory firms can help support your lawyers and staff:
1. Strategic Planning
Among the most common issues related to strategic planning is how to respond to what amounts to a significant shift in the economy since the great Recession. Craig Caldwell, department chair in marketing and management at Butler told the Lawyerist last year that “firms can get blindsided by getting too down into the weeds of their business. It’s necessary at times, for the livelihood and success of the firm, to pop your head up, see what’s going on in the marketplace, and see whether your firm needs to make some changes.”
Often, going through that process with an outside partner can help your law firm consider a broader spectrum of potential opportunities and challenges.
2. Cost Management
HBR Consulting’s annual Law Department Survey reported last year that half of surveyed in-house legal team respondents said that controlling cost was a top priority for their department. By enlisting the support of an advisory firm, law firms can ensure they are in line with demand and law department budgets. It could mean commoditizing or even eliminating certain types of work, or in some cases embracing technology to help manage resources allocated for any given project.
3. Pricing and Profitability Analysis
According to the 2019 PwC law Firm Survey the main priorities for Finance functions [within law firms] continue to be “pricing and profitability and working capital.” It can be easier to ignore these pressures when revenue is high and the economy is doing well, but when budget matters, taking a second look at staffing levels, adjusting compensation levels, and reengineering partner payouts could be key to weathering the storm.
“It’s easy to ignore change when your profits are up. But most changes in the profession coincide with downturns or recessions that go way back to the 1960 recession, which prompted firms to move to monthly billing from the then-standard yearly billing. Almost every recession has coincided with some significant change in the profession,” said Blane Prescott, a management consultant and CEO of MesaFive LLC, to the American Bar Association last year.
4. Marketing and Business Development Support
Without a way to grow their portfolio of business, even the best attorneys can fall short. And while large law firms tend to have dedicated staff to assist with marketing and business development needs, lawyers at medium and smaller sized firms might find themselves with little to no time to generate new business. This work can include helping uncover and implement new technology, improving tracking and analytics, and advising on how marketing can become a more integral part of the firm’s success.
5. Competitive Intelligence Services
Client needs are changing at an increasingly fast clip. Knowing the influences behind those changes, and in some cases predicting those changes before they happen, can be critical to winning new work. A growing body of advisory firms are offering competitive intelligence services to law firms. These services come in many shapes and include the use of sophisticated technology to sift through millions of data points about companies, industries, and the regulatory environment.
As the legal industry continues to adapt and change, advisory firms are likely to play a role of increasing importance. Regardless of your law firm’s size or areas of work, leveraging outside sources for operational and strategic assistance can help reduce distractions and ensure your lawyers stay focused on what matters most – the client.