How do law firms stay competitive?

[Lottie]

Hi

Just prepping for an interview and am wondering how I would answer the above question?

I'm assuming along the lines of integrated services, investing in technology that would reduce costs to clients...

Any help much appreciated!
Thanks
L

 

[Nicole]

I think the way I would tackle it is to first ask what it means to stay competitive.

For example (and this is just my opinion), it could mean:

• Retaining clients
• Retaining talented employees
• Competing with other businesses on price
• Competing with other businesses on quality
• Growing in revenue or profitability at a certain rate
• Access to particular markets
• Obtaining new clients
• Running an efficient business
• Strength of brand

Then I think you can start to answer how you achieve those objectives - like through technology or outsourcing etc.

 

[Lottie]

I think the way I would tackle it is to first ask what it means to stay competitive.

For example (and this is just my opinion), it could mean:

• Retaining clients
• Retaining talented employees
• Competing with other businesses on price
• Competing with other businesses on quality
• Growing in revenue or profitability at a certain rate
• Access to particular markets
• Obtaining new clients
• Running an efficient business
• Strength of brand

Then I think you can start to answer how you achieve those objectives - like through technology or outsourcing etc.

Thank you, Nicole!

 

[Jaysen]

I think the way I would tackle it is to first ask what it means to stay competitive.

For example (and this is just my opinion), it could mean:

• Retaining clients
• Retaining talented employees
• Competing with other businesses on price
• Competing with other businesses on quality
• Growing in revenue or profitability at a certain rate
• Access to particular markets
• Obtaining new clients
• Running an efficient business
• Strength of brand

Then I think you can start to answer how you achieve those objectives - like through technology or outsourcing etc.

This is great.

I'll add with some examples of how law firms try to achieve those objectives/stay competitive.

• International expansion: Many commercial law firms have aggressively opened up international offices over the past two decades. Why? Their clients are more international. If a client wants to open a factory in India or acquire a European business, it'll need advisers with the expertise to advise them on the laws and regulations of that particular jurisdiction. Overseas expansion also hedges against slow growth in domestic markets. (Note, this doesn’t have to be new offices, it could also be best friend networks or alliances with international law firms.)
• Countercyclical practice areas: During the 2008 financial crash, deal making slowed down considerably. So law firms that were too dependent on corporate/private equity work for their income suffered. On the other hand, some law firms had invested in countercyclical practice areas like restructuring and litigation. These practice areas tend to be busier during times of slow growth, meaning these law firms could stay competitive in a downturn.
• Mergers: Over the last couple of decades, mid-sized law firms have been increasingly squeezed between larger, full-service law firms and boutique law firms. To stay competitive, some law firms have merged (or adopted Swiss vereins structures), meaning they can pool resources, expertise and clients.
• Salaries: Many UK-based firms have raised salaries to retain NQ's and star partners who have been increasingly drawn to the higher-paying US law firms entering the London market.
• Legal Services Delivery: Since (at least) the financial crash, there has been a downward pressure on legal fees, meaning law firms need to find away to improve their efficiency to bid competitively for some of their legal advice. By opening legal services centres – like A&O’s Belfast centre or CC’s acquisition of Carillion’s Advice Services – law firms have been able to complete legal work at a cheaper price.
• Investing in technology and innovation: The law firms who have invested in technology – either their own or a third party service – can automate legal processes and drive down the cost for clients.

 

[Lottie]

This is great.

I'll add with some examples of how law firms try to achieve those objectives/stay competitive.

• International expansion: Many commercial law firms have aggressively opened up international offices over the past two decades. Why? Their clients are more international. If a client wants to open a factory in India or acquire a European business, it'll need advisers with the expertise to advise them on the laws and regulations of that particular jurisdiction. Overseas expansion also hedges against slow growth in domestic markets. (Note, this doesn’t have to be new offices, it could also be best friend networks or alliances with international law firms.)
• Countercyclical practice areas: During the 2008 financial crash, deal making slowed down considerably. So law firms that were too dependent on corporate/private equity work for their income suffered. On the other hand, some law firms had invested in countercyclical practice areas like restructuring and litigation. These practice areas tend to be busier during times of slow growth, meaning these law firms could stay competitive in a downturn.
• Mergers: Over the last couple of decades, mid-sized law firms have been increasingly squeezed between larger, full-service law firms and boutique law firms. To stay competitive, some law firms have merged (or adopted Swiss vereins structures), meaning they can pool resources, expertise and clients.
• Salaries: Many UK-based firms have raised salaries to retain NQ's and star partners who have been increasingly drawn to the higher-paying US law firms entering the London market.
• Legal Services Delivery: Since (at least) the financial crash, there has been a downward pressure on legal fees, meaning law firms need to find away to improve their efficiency to bid competitively for some of their legal advice. By opening legal services centres – like A&O’s Belfast centre or CC’s acquisition of Carillion’s Advice Services – law firms have been able to complete legal work at a cheaper price.
• Investing in technology and innovation: The law firms who have invested in technology – either their own or a third party service – can automate legal processes and drive down the cost for clients.

Thanks Jaysen. Super helpful.

 

[Jerome]

Hey, So I'm applying for a TC and one of the questions asked "From the research you have done, what do you think (blank) will need to do to stay competitive in the legal market" (The firm's PMC if that makes a difference)

The problem is that some of the things I would say the firm has done or I dunno how viable it is given COVID. For instance, they have merged with another firm a couple of years back, expanding doesn't seem very feasible at the moment because of the economic climate which also impacts the suggestion of improving salaries to attract better lawyers. Finally, I feel the investment in technology answer is already obvious especially given covid. The only thing I can think of is cutting back office space and using that to put more money into tech.

Also, I'm thinking how they stay competitive is up for interpretation like obtaining new clients, attracting new employees, growing revenue etc.

 

[Dheepa]

Hey, So I'm applying for a TC and one of the questions asked "From the research you have done, what do you think (blank) will need to do to stay competitive in the legal market" (The firm's PMC if that makes a difference)

The problem is that some of the things I would say the firm has done or I dunno how viable it is given COVID. For instance, they have merged with another firm a couple of years back, expanding doesn't seem very feasible at the moment because of the economic climate which also impacts the suggestion of improving salaries to attract better lawyers. Finally, I feel the investment in technology answer is already obvious especially given covid. The only thing I can think of is cutting back office space and using that to put more money into tech.

Also, I'm thinking how they stay competitive is up for interpretation like obtaining new clients, attracting new employees, growing revenue etc.

I think this question requires a two-fold assessment. One, what is the state of the legal market - I'd say it's very competitive at the moment with clients being in the driving seat because they are spoiled for choice with the range of firms. Two, in a market like that what can PMC do to differentiate itself - as you rightfully say, this can involve multiple things like attracting new employees, cutting costs, new clients etc.

Some things I think are worth looking into:

1. A lot of firms are offering consultancy services/consultant lawyer roles - this gives clients access to reputable lawyers who want more flexibility with their hours (these consultant lawyers tend to work on 20-35 contracted hours a week - see A&O's model for this).
2. Building better relationships with existing clients - more client events, webinars, wider social media presence, better branding (Travers Smith recently underwent a huge overhaul in their branding - think about why this is, and what that says for how they want to position themselves to clients)
3. Diversity - companies are increasingly making decisions on who to include in their legal panels based on a firm's diversity statistics. What can PMC do to ensure they continue to represent interests (such as diversity) that are important to their clients

Hope that gives you more ideas!