3 Trends Used by Law Firms to Reduce Costs and Optimize Productivity
May 31, 2018
By Michael Raposa Jr., VP, RRD Client Services
The legal industry is rapidly changing for both law firms and in-house corporate counsel.
Increasingly, large organizations are contributing greater resources to expand their in-house legal teams. Meanwhile, the General Counsel (GC) role within organizations is transforming from one that focused on traditional risk and compliance issues to one of consultancy. Now, these practitioners are routinely working with organizational leadership regarding strategic business planning.
This new blended role for Corporate GC’s comes with its challenges. Specifically, it has placed increased pressure on them to assume functions that were traditionally—and efficiently—handled by outside, highly specialized law firms.
Law firms are not immune to this paradigm of change. They currently face tough competition from large corporations that are bolstering up their own internal teams. To drive new business growth, they must aggressively market their firm’s value proposition, but the competitive landscape is also forcing them to apply cost containment and efficiency tactics. Moreover, many law firms are in the nexus of a generational shift, as baby boomers retire and millennials occupy new senior positions.
The good news—several trends have emerged to help the legal community – both corporate legal teams and law firms—address these competitive, operational and expense-related threats.
We all know that the IT function is very demanding. With the need for regular maintenance, upgrades, data patches and so on, managing the IT infrastructure at an in-house law practice can stem productivity. This is the reason why an outsourced solution for IT services makes sense.
Although it’s an expense, it is one that generates solid ROI in the long run, particularly thanks to the adoption of cloud-based technology.
By transferring technology management and support services to a specialized IT provider, law practices are able to focus on what they do best—address legal issues and provide superior service. The range of services that can be provided under the umbrella of IT outsourcing support is expansive and can include any technology-related services, including maintenance of industry software, online payment systems, secure online collaboration tools and digital marketing functionality. To help reduce other essential operational expenditures, many firms are now exploring outsourcing to help with other non-legal activities.
Digital Transformation and Specialization1
Another area where technology is preparing law firms to deal with competition involves the creation of highly specialized practice areas. Law firms that apply a one-size-fits-all approach to solving client problems might need to revaluate their services mix given competition from law firms that are micro-focused.
Big data and technology play a role here. Lawyers rely on both to make strategic decisions faster and to deliver on goals more effectively. Today, lawyers recognize the need to evolve beyond conventional work approaches and actively incorporate technology in the following ways—analyzing historical big data, leveraging artificial intelligence (AI) and the Internet of Things (IoT), managing business intelligence, leveraging machine learning to research client history and designing reporting systems.
In short, data has revolutionized the way the world works, and law firms are no exception. Even though most firms are still in the nascent stage of acquiring digital technologies, large ones are paving the way for a complete digital transformation.
New compensation structures
Within law firms, a critical factor that affects both costs and productivity is the traditional method of billing by the hour. This compensation model might inadvertently incentivize attorneys to complete their tasks in a less than optimal timeframe. It’s no surprise then that the industry as a whole has been sluggish to adopt innovative technologies that favor efficiency.
Recently however, many law firms have shifted towards alternative payment frameworks, such as “fixed rate per service” and performance-related profit sharing to re-invigorate their teams. For example, according to the PwC Law Firms’ Survey (2017) conducted in the UK, “the move towards fixed fees continues relentlessly, now accounting for more than a quarter of work in Top 25 firms2.” This trend was precipitated by the need for law firms to become more attractive to top talent in a fiercely competitive market.
The deregulation of the law industry in several countries is also birthing another trend—some firms are now embracing corporate style remuneration plans, something that would curtail partners’ incomes at the end of each year, and defer them instead.
Ultimately, the law industry is at a critical point in its evolution. The facts are clear—law firms face competition from corporate law departments, pressure to do more with less, and recruiting constraints in addition to the requirement to maintain client satisfaction. The solution—the legal industry needs to continue on its path of technological and operational transformation. Without it, there can be no profitable or efficient future.
RRD has created a suite of productivity solutions that align with the particular security, regulatory and cultural requirements of legal practices. Please contact me, Michael Raposa Jr., Vice President, RRD Client Services at email@example.com to learn more about our customized legal support services or complete our Complimentary Assessment form. We look forward to starting a conversation.
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