Performance on the line
By Steve Arundale
Legal firms need to change today in order to adapt for tomorrow.
There is no arguing that many legal firms are enjoying enhanced business levels influenced by an improving economic climate. Indeed, this year’s NatWest benchmarking report showed that many firms were improving performance in terms of revenue growth and PEP.
Improving business levels is a challenge that comes up time and time again in conversations with firms. Many are now desperate to secure new personnel to service demand, and many are once again talking about a growth strategy that is built on their ability to attract lateral hires. However, behaviours that were readily accepted during the recession are not as effective once the volume of matters starts to reach a healthy level.
These operational challenges sit within business efficiency, process management, partner performance and of course succession. Many firms say they are simply too busy to divert their attention from their priorities of servicing the work they have in front of them. A number are also concerned that they do not have the skill set they need to tackle these issues and for now the recruitment of additional legal capacity is their number one objective.
The habit of firms willing to layer in new overhead costs without truly understanding the performance and efficiency of existing fee earners continues to surprise me. Surely the challenge must be to make existing resource more productive by employing process management, performance management and new technology. Without understanding the existing or future capacity within its workforce, should a firm really embark on a recruitment programme?
This challenge may appear somewhat negative in tone. But let’s be clear in our understanding that economic performance is cyclical. Whilst the trading climate is positive now, that won’t be the case for ever. And, depending on which economist you speak to, the current positive cycle is likely to expire some time between 2018 and 2020. There aren’t many senior managers within law firms who are looking this far forward, and they are certainly not preparing their firm for the downturn in work levels that is likely to arrive at some stage in the future. As we stand, the only viable response will be for many firms to resize their workforce and we know that this is both financially and emotionally expensive.
Need for action
The quote “if you fail to plan then plan to fail” carries significant meaning. Leaders of law firms must not only manage the well-reported challenges of delivering legal services but they must also prepare their firms for the economic challenges that lie ahead. In doing so, this will undoubtedly force them to examine their operational model and drive out some of the required areas of performance improvement. Of course, operational improvement does not come without investment, but surely the time to make that investment is when business levels and profits are strong – ie now.
The other obvious thing to say is that banks are carrying positive lending appetite. The cost of investment can be funded and debt repayments geared in line with cost and profit benefits delivered against improved business efficiency.
In summary, legal firms can not simply live for today; they must look forward and consider the implications of the future and develop accordingly.
If you fail to plan then plan to fail.