Law firms have been hearing client outcries for change, innovation and re-imagining the legal services business delivery model even before the current health crisis. Over the past few years, some positive operational changes and innovative measures have been implemented by law firms, borne mostly out of necessity as opposed to self-initiation.

In the COVID-19 era, law firms must think expansively about strategic planning for 2020-2021 and beyond.  Certainly, the transition from traditional-to-remote operations has posed practical issues for law firm leaders; however, the issues have required mostly tactical responses.  Now, as business life transitions into the “new (ab)normal,”  law firm leaders face a massive, unprecedented challenge to architect a strategic blueprint for the future.  Obviously, no single blueprint applies to every law firm.

Notwithstanding, when developing a post-quarantine, blueprint for the law firm’s strategic plan, every Chairman/Managing Partner and Management Committee must have the following twelve topics on the agenda:

1.     Diversity. For decades in the legal industry, diversity has had lots of room for improvement to put it mildly. A second-rate approach to diversity is not societally, ethically or professionally acceptable, especially in an industry dedicated to promoting justice. Law firms must make every effort to promote a welcoming environment of opportunity and inclusivity for all colleagues, regardless of race, ethnicity, age, gender, sexual orientation or gender identity. This means more than “lip service” to diversity, like including the professional bios of a sampling of their perceived “diverse representatives” in a glossy brochure for a client pitch without ever utilizing those individuals in a substantive role on the matter.  It means having culturally and ethnically heterogeneous individuals in positions of power in firm management/administrative positions and meaningfully involved in the hiring, promotion and compensation process.  Diversity creates more robust dialogue, better strategic insights and a broader array of ideas. Diversity is good business. More importantly, it’s right thing to do.

2.     Retained earnings. An unmistakable lesson of pandemic economics is that “cash is king.”  Law firms with liquidity issues have been forced into survival mode, expense management decisions, like reducing headcounts and slashing compensation.  Some of the measures could have been avoided with different fiscal policies.  For most law firms, retained earnings is a completely foreign concept.  Law firm culture (and, in part, some tax considerations) result(s) in firms cleaning out cash at the end of each fiscal year with all profits being distributed to the partners.  This fiscal policy merits serious reconsideration as keeping retaining earnings allows for strategic investment in people and/or technology, and provide a cushion against downturns.

3.     R&D / Marketing.  Organizations which invested in research and development and marketing in the aftermath of the 2008 Great Recession grew their market share exponentially faster than their competitors.  Law firms must think creatively and expansively about R&D and marketing because firms are no longer just engaged in the practice of law, but also in the business of delivering legal services where a differentiator creates a competitive advantage. Forward thinking R&D and marketing initiatives may focus on different staffing models, leveraging data analytics, expanding technology usage (artificial intelligence & machine learning) and/or digital marketing. Again, there’s not a one-size-fits-all formula. Notwithstanding, smart minds on a management committee meeting must develop an imaginative R&D and marketing strategy that fits their particular firm. 

4.     Variable workforce.  When law firm partners don’t generate enough billable client work, two undesirable things usually happen: (1) partners handle work below their paygrade (which has countless negative “knock-on” effects); and (2) lower-cost associates and/or para-professionals become under-utilized, “ creating economic stress and delayed professional development. With regard to point (2), why not consider the playbook of Uber, WeWork and Upwork?  After all, we live in a digital world where our junior colleagues embrace the “gig” economy.  Law firm leaders should consider employing a more variable workforce which can easily expand and contract.  One can imagine firms sharing a pool of associates who can be engaged when client demand dictates.  Surely, the devil’s in the details when it comes to things like conflicts, training, confidentiality and economics.  That said, firms should think creatively about a variable workforce rather than view associates as a fixed cost, economic burden during period of low demand.  Our junior colleagues would certainly embrace the opportunity to be productive and professionally develop, rather than sit idle and worry about their job.

5.     View Alternative Legal Services Provider as a Partner.  Alternative Legal Service Providers (ALSPs) have carved out a valuable role in the legal ecosystem.  Law firm leaders should, in their minds, re-characterize ALSPs from being a “competitive threat” to being in the “potential partner” role.  Clients know that every legal matter and every task required to address a legal issue is not bespoke.  Today, mass customization is core to the business of delivering legal services. Few law firms can cost effectively handle mass customization better than ALSPs.  Indeed, ALSPs can capitalize on cheaper competent labor, technology and time zone differences to positively augment law firm service delivery. ALSPs may not be the right path for all firms, but they need to be part of the dialogue.

6.     Re-thinking Real Estate. The second largest fixed cost for most law firms is real estate. If the pandemic has proven anything, it has shown that working remotely can work and that the real estate footprint of the legal industry can be considerably reduced.

7.     Training.  A law firm’s greatest asset is its employee base. Successful businesses invest in their assets; they curate and preserve their assets; winning business optimize asset value. For the remainder of 2020 and into 2021, training junior legal professionals and para-professionals remotely will be challenging.  Since training in-person, by observation, by osmosis and “baptism by fire” is not feasible, law firm leaders should carefully architect technology-enable remote training programs. 

8.     Subscription-Based Economic Model.  The hourly billing economic model at most firms is prone to cyclicality, variability and profit margin compression.  Companies with monthly recurring revenue, or MRR, are highly valued because of the stable revenue stream.  Most clients are used to pay for goods and services on a fixed monthly, annual or multi-year basis and many would welcome paying for legal services in a similar manner.  The most forward-thinking law firm leaders will consider and implement subscription-based pricing models which are not universally applicable to all legal work, but can work well for some services (e.g., ’34 Act SEC reporting, EEOC complaint work; non-transactional tax advice; commercial leasing; government relations and lobbying).  One can easily imagine “Bronze,” “Silver” and “Gold” legal service packages at different monthly pricing level.  

9.     Utilizing/Understanding Raw Data. Law firms are sitting on mountains of raw unstructured data which when properly evaluated, provide rich business intelligence. Every business poised for success in the 21st century is leveraging data generated internally and procured from external sources. Law firm leaders who let their firms become paralyzed by data volume or who ignore a big data strategy because of the vast world of data usage possibilities position their firms for a second-place finish at best.  Starting now, every law firm leader should explore, develop, implement and periodically revisit a data strategy for each business segment.

10.  Technology. Thirty-eight states now include, as part of their professional rules of conduct, a duty of technological competence.  No longer can lawyers operates as if technology is someone else’s job.  confidence.  Even putting aside the ethical and risk management mandate, law firm leaders should formally address their firm’s technology roadmap because technology usage and competence is good business both for the law firm and its clients.

11.  Client Success. Law firms must put programs in place that measure and ensure client success, from the perspective of the client.  Lawyers in private practice place far too much emphasis on winning a case, obtaining a favorable ruling or closing a transaction and far too little emphasis on whether these things equate to success for a client. Often lawyers in private practice project their own definition of success upon their clients.  Successful organizations in other industries don’t do this.  Instead, they ask for customer feedback, solicit customer surveys and create customer focus groups to get feedback on how their customers are feeling.  Formal client success programs at law firms should go well beyond conducting periodic interviews with the firm’s top 10 clients.  A deeper and broader probe should be considered.

12.  Create a Firmwide Business Generation Plan.  In the law firm context, “generating business” far too often is left to far too few partners who have mastered the art of selling legal services.  A tome can be written on the problems with relying on a small universe of rainmakers.  There is absolutely no reason why business development should be left to rainmaking partners or even to lawyers for that matter.  Within ethical boundaries, there are countless ways to economically incentivize and reward associates, pricing and finance directors, marketing professionals, para-professionals and administrative staff to participate in the firm’s business generation efforts. Relying only on partners to generate business is a self-limiting business proposition that merits reconsideration.

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Lofty ideas discussed at strategic planning sessions are valuable only if, after robust discussion, they are implemented, regularly monitored and periodically recalibrated to drive the desired results.  As law firm leaders hold strategic planning sessions to cope with and re-emerge from the COVID-19 crisis, law firm leaders should be mindful of the unique, positive opportunity ahead of them.  Lawyers will be critical to the global recovery from the current health and economic crises.  Law firms that intelligently address the twelve topics above should flourish in an era of high demand for lawyers.  Law firms that ignore these topics do so at their peril.