Aside from a struggle to retain talent, firms are battling for every dollar yet failing to harness innovation that could help keep them at the forefront. Consultants and firms say there are too many lawyers in the market with expanding in-house teams and new online and non-legal operators that are an increasing threat to big firms.
Competitive boutiques are soaking up some lawyers while top non-lawyer professionals are leaking into specialised niche competitors and multitasking accountancy practices. Consultants warn that big firms are not doing enough to retain talent or react quickly or extensively enough to disruption.
Bill Fazio, former managing partner of mid-tier firm Herbert Geer who now runs consultancy Fazio Advisory, said there were far too many lawyers and little room for the influx of new graduates.
Aside from a struggle to retain talent, firms were battling for every dollar yet failing to harness innovation that could help keep them at the forefront.
Mr Fazio said that smaller, nimbler players were more quickly able to grasp technology, while the rise of diversified players such as legal placement agencies, virtual and dispersed firms with fixed-fee models and online document providers were becoming increasing threats.
LIFETIME LOYAL CUSTOMERS NO MORE
“A lot of these pressures come back to more sophisticated companies and businesses that are no longer lifetime loyal customers, but rather are savvy at unbundling what they go to big firms for, thinking the cost-benefit is no longer there,” Mr Fazio said, ahead of a presentation at a Managing Partners Boutique & Small Firms forum in Queensland.
The all-encompassing role firms once served for companies was now being dished to project managers, Mr Fazio said, and while they still relied on firms for litigation and complex work, many organisations were turning to other service providers for documents, agreements and transactional work that were cheaper and just as effective.
Non-legal mediators were also assisting in dispute resolution, he added, referring to former Victorian premier Jeff Kennett’s involvement in helping retailer Coles to mediate a deal with grocery suppliers.
However, Jacinta Fish, managing director of a Melbourne-based legal search and recruitment firm, Jacinta Fish Legal, said a better outlook for the legal market could lead to greater competition in recruitment among top-tier firms. She pointed to an uptick in energy, projects and infrastructure work as well as mergers and acquisitions transactional work in the past year.
“There will be more movement flowing from that, people looking for opportunities after not having much choice in the past few years,” Ms Fish said.
A survey conducted by her firm found that lawyers’ average wages rose by 3 per cent in 2014-15 while salaries in the in-house market increased 3 to 5 per cent. Another showed 28 per cent of legal professionals across firms and in-house would be looking for a new role in the next six months, in search of better pay and career opportunities, while 31 per cent planned to stay where they were.
She warned that the growth of in-house legal teams was pilfering talent from mid-tier firms and private practice.
The market for in-house lawyers had grown in the past few years and in-house teams had become far more sophisticated, but Ms Fish warned that while corporates paid a premium to lure talent, salary rises petered out at a particular level.
People + Culture Strategies managing principal Joydeep Hor said boutique and smaller firms needed to work on retaining staff and top talent.
“There’s a high level of allegiance, but not a huge amount invested in terms of vision and values,” Mr Hor said. “There’s a shortage in firms differentiating their product and product space from larger firms. That’s leading to some frustration.”
SMALL GENERALIST PRACTICES ‘THRIVING’
Warlows Legal managing partner Harriet Warlow-Shill said that small generalist practices were thriving.
“If we do not have any experience in the area of law, we will refer the matter to another law firm,” Ms Warlow-Shill said.
Mr Hor said that executive teams in companies in other sectors had vast management experience, not so common in legal firms, which meant they were not as fine tuned in leading, connecting with and inspiring staff.
“There are internal cultural problems and firms need to ask themselves ‘what do we want to be’, they need an inward focus as well as an external focus on clients,” he said. “The best way to do that is engage in dialogue with staff. Firms fear they will be hit with a litany of grievances but more often it’s suggestions and contributions that enhance the capability of an organisation.”
Lawyers could market themselves without a million-dollar budget not just on LinkedIn but elsewhere as clients were also using Twitter and Facebook to search for lawyers.