At this time of the year you will likely receive a whole bunch of emails in your inbox coaching you on what success should look like for the year ahead, and how you can make sure you achieve your goals. The reality is though that by week 2 of the new calendar year most of us have moved on from any big picture goal setting ambitions we stupidly set on New Year’s Eve and are, by now, heavily invested in the minuter of day-to-day life of making sure we meet our billable targets!
So, with this background in mind, I wanted to say whenever I think about what success might look like, I go back and read one of the best articles ever written on this topic – a post by Mark A Cohen in Bloomberg Law way back in August 2015!
Straight off the bat, it’s notable that the title of Mark’s post is ‘What are the Right Metrics for Law Firm Success?‘ and not ‘What are the Right Financial Metrics for Law Firm Success?’ – and therein lies one of the primary reasons why I love Mark’s post so much.
Anyhow, in his post Mark sets out the following 14 metrics under the sub-title ‘How should a law firm be measured?‘:
Excellence in areas that relate to client business
Effective use of technology
Alignment of financial interest with clients
Flexible billing model
Collaboration with clients and others in legal supply chain
Mentorship and training
Performance metrics — client surveys and internal
Pro BonoProgram and Community Involvement
If you take “getting paid for what you do” and “being profitable” as a given, then I think Mark’s list is about as close to perfect as you can get.
So, if you are still on the “What will success look like in 2023?” or even, “What will success look like in FY24?” (heaven forbid you are that forward thinking!), bandwagon; then take a look Mark’s Bloomberg post – it’s a cracker even 7+ years after it was published!
As usual comments are my own. And I hope everyone has a great 2023!
I have only tried to predict what might happen in the next 12 months in the world of AusLaw once. It was exactly 10 years ago – 2013 – and I got it so horribly wrong that many would argue I should never, ever, touch this subject again!
Of course, countering that I would argue that getting numbers #2 and #3 close to right, at that time, showed major insight – and surely you can gift me #6.
But there has to be a reason why I have not done a prediction post since and that reason is: Because I’m rubbish at it!
Instead, these days, I review the predictions of others and opine on whether – from my lofty hight of ‘know it all‘ – they can call it better than I can – which, they usually can!
And so that is why this year I would like to draw your attention to the 2023 Citibank-Hildebrant Consulting LLC ‘Client Advisory Report‘.
In its 15th Year, this Report has done a whole lot better at guessing what the future holds for law firms than I have ever done; and Part II: ‘Looking ahead to 2023 and beyond‘, Section B: ‘Key trends to watch in 2023‘, sets out 16(ish) trends to watch-out for in the next 12 months.
So let’s take a look at what these suggested trends are, and I will then add some comments I might have on them.
THE REPORT’S FORECASTED 2023 TRENDS
The evolution of the hybrid work model to a “more flexible” work model
The growth and reshaping of lawyer leverage
Equity partner growth at more firms
Greater focus on both revenues and expense-related operation efficiencies, including: I. Rethinking space II. Redesigning the professional staff leverage model III. More outsourcing IV. Increased use of project management V. Thinking twice about business travel VI. More investment in technology VII. Improving realization
Continued focus on improving the billing and collections process VIII. Greater focus on cross-selling opportunities IX. Financing growth
And here I go with my 2c.
The jury is out with this one – on the part of both the employee and the employer. I read a report the other day that stated employees wanted back in the office with rising cost of living expenses (read gas and electricity, but also inflation more generally). If that is true. get a couple of 30+ degree days in a row running the aircon all day, employees may well want to be working back in the office pronto (anyone else remember going to there cinema to cool-down?). On the other hand, employers are looking to reduce their footprint – after all, rent is up there with salaries winning the Biggest Overhead cost award. Some compromise is inevitable but it would not surprise me if we see a hybrid of a model introduced into Auslaw about a decade ago by Herbert Smith Freehills where you see most lawyers in the office 3 or 4 days a week, but back-office support staff (or Allied Professionals) working mostly from home.
There’s a recession on the way. It has already arrived in many parts of the world. And with a recession comes something called ‘stickiness’ – where lawyers, especially at Special Counsel level, keeping work they could otherwise be passing down to more junior lawyers makes sure they (a) make bonus, and (b) keep their jobs [after all, Special Counsel is the biggest loss leading level in most law firms]!
Unlikely – 5 generations in the workforce and a recession. I’d think you need to be very special to be looking at equity partner entry level at the moment. Now if we are talking salary partner, I would agree. And keep in mind that roles like ‘Managing Associate’ and ‘Special Counsel’ were born out of the 2008 GFC, so we may see more of these job descriptions appearing in job adverts in the near-ish future.
Absolutely, but let’s look at this a little closer: I.’Rethinking space’ – yes, see my response in 1 above II. ‘Redesigning the professional staff leverage model’ – no, see my answer in 2 above III. ‘More outsourcing’ – I wish, see number 8 from my 2013 prediction list! IV. ‘Increased use of project management’ – we have been talking about this for over a decade and if we still haven’t got this right then we don’t deserve to keep putting this on our ‘wish list’ V. ‘Thinking twice about business travel’ – absolute no brainer! Partners’ use of their airmails for upgrades will be a growing trend in the next 12 months! VI. ‘More investment in technology’ – yes and no. Yes if it is for cyber-security (especially client-driven cyber-security requirements), and yes if it is for time-based billing. But no if it is for anything else. VII. Improving realization – AFAs – Pre-negotiated discounts – Continued focus on improving the billing and collections process So much to say here, but all I will say is – rubbish. And what on earth is a ‘pre-negotiated discount’, is that a contractually agreed volume discount? If so, it is not an AFA! VIII. Greater focus on cross-selling opportunities – as I’m currently reading Heidi Gardner and Ivan A. Matviak’s ‘Smarter Collaboration: A New Approach to Breaking Down Barriers and Transforming Work‘ (didn’t realise they were married before I read this) I would hope so. But experience has shown me that partnership deeds drive cross-selling opportunities and not altruistic behaviour a lot better than HBR top-selling books! IX. Financing growth – ahh, maybe we wait and see how the other predictions go! And keep in mind that financial growth does not necessarily mean ‘profit growth’, which should be the main game for any law firm!
Anyhow, as usual comments are my own. And I hope everyone has a great 2023!
As I have written on this blog on numerous occasions since March 2013, big international law firms need to consider – and account for – foreign exchange (FX) currency fluctuations – especially if their P&L is based in one currency – whether that be GB Pounds or US Dollars.
So it was with some amusement that I saw the following article headline in The American Lawyer today:
‘As Currencies Fluctuate, Law Firms Adjust Lawyer Pay and Billing Across the Globe’
But, before we all get ahead of ourselves and start to think law firms have finally figured out that as they approach $2BN+ in global revenue with business operations – in many cases – in over 20 countries, they might want to think about currency fluctuation issues, the real reason this has all of a sudden now become an issue comes out in the article:
‘Firms are taking steps to minimize the impact exchange rates could have on partner compensation, associate salaries and other expenses’
Which itself raises another issue I have mentioned so many times previously on this blog, if currency exchanges do fluctuate over the course of a financial year, what does that do to your multiplier?
Do you go from a 3x multiplier to a 5x? Do you go from a 5x multiplier to a 7x?
And what happens if the FX fluctuation is as a result of a stronger local currency, do you go from a 5x multiplier to a 3x?