Predictions for 2014

The beginning of a new year is a good time for reflections and analysis of what news that lay ahead and what trends to expect for the legal market during the coming year. What should be the top priorities for law firms in 2014?

LexisNexis has asked for predictions from 21 experts in the legal industry, listed in the article “21 Expert Predictions for the Legal Industry in 2014”. Similarly, JD Supra has asked law firm managers and legal strategy consultants to provide their views on the legal market 2014. The answers are collected in the two articles “Top Priorities for BigLaw in 2014 – the CMO Perspective” and “Top Priorities for Law Firms in 2014 – the Consultant Perspective”.

The respondents have provided a diverse mix of responses, naturally, but also some general themes. There seems to be a common understanding that the economy will improve, but that this does not mean that law firms can go back to increased hourly charging. Success will depend on delivering excellent client experiences and value. Law firms therefore need to remain focused on client service, smart marketing, innovation and efficient business models.

Jordan Furlong focused on the business model in his answer:

“2014 will be the year that law firms either get serious about making themselves into competitive businesses, or start planning for their elimination from the market. Most firms now recognize that the legal services environment has become dramatically more challenging: clients want lower fees at more predictable prices, and they’re taking advantage of multiple sources of legal work other than their traditional outside counsel. So law firms must streamline their operations to become more productive, analyze and control their costs of doing business, heighten the predictability of their fees, create workflow plans that engage and reward the most appropriate personnel for each task.”

“Cutbacks and price wars and lateral acquisitions have all been tried and none has alleviated the pressures on law firms; it’s time to accept the conditions of the new market and start transforming law firms into professional businesses that can dominate that market.”

The need for a new business model and focus on efficiency was a key word for many of the other respondents as well, for example Adam Stock:

“The top issue for law firms will be working on efficiency models. As long as the primary business model for law firms is getting paid for time, there are not enough systematic incentives for building more efficient models – the more time you spend, the more money you get paid! We are now dealing with much more informed and empowered buyers who have more choices. At large companies that we serve, legal costs are up for negotiation like the fees of other suppliers. Companies have many choices of firms that are based on different business models. Choices include: using firms that have a contract attorney model, working with firms on a fixed fee model, and working with firms that are willing to share risk.”

Aligned with a new business model is also the need for new fee arrangements. Ryan McClead predicted that 2014 would be the year that “Alternative Fee Arrangements will give way to Alternative Legal Services. Rather than infinitely rejiggering how they bill for services, firms will focus on completely rethinking the way their services are delivered.”

Aleisha Gravit added client targeted outcomes and the importance of becoming a business partner to the fee discussion:

“Firms will be required to really look inward at their own business models and make adjustments that allow the firm to be a business partner with their clients, including being able and willing to share the risk, if it means providing true value to the client and delivering on their expected outcome.”

Other experts focused on the importance of marketing and differentiation, and the importance of non-legal professionals. For example, John Grimley, referred to the new award winning ‘sales pipeline’ business development model of Baker & McKenzie:

“Sales pipelines in law firms may sound gimmicky – but they’re far from it. They identify new potential clients based on sophisticated market research then act as point in helping attorneys pursue new business to close. This requires sophisticated business development professionals working alongside subject matter practitioners to win new business from new prospective clients and existing clients.”

The importance of non-legal staff for law firms has also been thoroughly examined by John Sterling in the recent article “Non-Lawyers: A Critical Success Factor for the Law Firm of the Future” . As John points out, having great attorneys has long been a critical success factor for law firms. The big change coming to the legal industry is the growing criticality of non-lawyers. He also points to the fact that the term “non-lawyers” in itself is a peculiar construct.

“Where else (besides large and mid-sized law firms) do highly educated professionals get placed on such limited career paths, essentially for lack of a JD? Furthermore, what is it about obtaining a JD that qualifies a person as an expert in information technology, project management, business development, process redesign, innovation, knowledge management or really anything besides the law and precedent?”

“More sophisticated law firms will be (are being) forced by clients and competitors to embrace technology, knowledge management, project management, lean process, and other management tools more common outside the legal industry. Successfully adopting any of those management tools requires attracting great people – well-trained, highly capable, hard-working and client focused – whose professional training is grounded in engineering, information technology, organizational psychology, management, and other fields.”

The predictions on a shift for the legal market as regards the importance of non-legal staff were confirmed late last year in the FT Innovative Lawyer Report as reported in “Innovation and the Bar Association”. The report concluded that there is a greater awareness of innovation and that law firms cannot longer focus only on their legal expertise but has to realize the need to focus more on developing their business around their clients and their needs, with a stronger emphasis on knowledge about client’s business and industry. The main innovative shift for the legal sector might be the realization of how the legal business can benefit from the non-legal staff. As John Sterling points out:

“Looking forward, business development and marketing professionals will play an increasingly important role in a number of areas including: gathering genuine, actionable client feedback; expanding existing client relationships (e.g., facilitating cross-marketing); identifying opportunities to deepen and strengthen existing relationships via process improvement, technology, pricing and other innovations. Perhaps the most challenging (or controversial) change coming to the legal industry is the inevitability of involving more non-lawyers in the direct delivery of client services. That growing involvement of non-lawyers will go well beyond (though it will include) the use of paralegals over the next five to ten years.”

Jayne Navarre pointed out the importance of innovation and taking action:

“So many things that should be done in the law firm, could be done if leaders would back away from the old, stale opinions and the crutch of precedent – show me who else is doing this. (Get rid of these words that kill great ideas and opportunities.) Innovate like you mean it in 2014. Innovate as if your life depended on it, and maybe it does.”

“Allow your staff to try something new – and perhaps even fail. Act decisively, deliberately, and freely. And, if you can’t; get some one who will do it for you. That is the leading issue for 2014–take action now.”

Amy Knapp shared the view on the importance for law firm leaders to take action during 2014, instead of “being hit by the tsunami”.

Steven J Harper, however, had a quite pessimistic view on how much action law firms leaders will take during the coming year:

“Based on their responses to recent industry-wide surveys, most law firm leaders will continue to ignore the changing world around them. As clients increasingly demand greater value from their outside law firms, managing partners will continue to squeeze as much as they can from the prevailing billable hour/leveraged pyramid model.”

Sam Glover also raised a note of caution, when focusing on new ways of delivering services, ensure that the professional obligations are not neglected:

“It’s hard to see much of a focus on professional obligations in all the excitement over technology and new legal services models. But professional obligations do not go away just because clients demand lower bills. Lawyers will have to focus on the business of law while making sure they maintain high professional standards. This could be difficult, especially as some firms make big bets on new technologies, business models, or non-lawyer ownership.”

In addition to these legal strategy and law firm management views it’s interesting to add some technology predictions for 2014, as legal IT is becoming more and more important.

Nicole Black has provided her predictions in the article “Legal Technology Predictions for 2014” and Brian Inkster has provided his in “Future Law: IT and Legal Practice Predictions for 2014”. As regards social media Nicole Black thinks that it has now become “a phenomenon, not a fad, despite many lawyers’ assertions to the contrary over the years. It’s obviously not going away and for that reason, lawyers are now flocking to social media in droves. That trend will continue and lawyers’ participation in social media will increase markedly in 2014.” LinkedIn and Facebook will fortify their market positions, but “the true winner with lawyers next year will be Google Plus. I believe that platform has truly come of age and many lawyers will begin to prefer it for online interaction over all others.” Brian Inkster agrees on social media as a phenomenon, but predicts that “Twitter will remain the best social media platform for lawyers but that won’t stop many mistakenly thinking that LinkedIn (or even Facebook!) is the place to be.”

Both Nicole Black and Brian Inkster agrees on the increasing use of cloud computing. Brian Inkster points out that most lawyers now seem to be accepting the benefits of cloud computing after some initial resistance, and Nicole Black predicts that 2014 will be a big year for cloud computing. “It will be the tipping point and I predict that 50 percent of lawyers or more will use cloud computing tools in their practices by the end of 2014.”

Of all new technologies, lawyers have embraced mobile tools the fastest, but Brian Inkster points to the fact that “whilst the use of smartphones and tablets will continue to rise amongst lawyers I do believe that often these devices are best for consuming information rather than producing documentation.” Another emerging mobile trend predicted by Nicole Black is wearable technology, such as smart watches and Google Glass. “Wearable technology is, in my opinion, the next stage of mobile computing and will serve to enhance and in some cases, replace smartphones.”

Other legal technology experts, such as Ron FriedmannJeffrey Brandt and Rob Ameerun have however a ‘more of the same’-view, not expecting any break out changes in 2014. They expect firms to focus on “running infrastructure, upgrading core systems, trying to ensure security, assessing cloud options, rolling out SharePoint 2013, and supporting mobile devices”“recrafting/reengineering the business processes and procedures to maximize efficiency and getting more out of the tools they already have” and “getting more out of their CRM implementations, which is still the weakest link in law firm business development”.

As always, it will be most interesting to follow the legal market developments and see which of the predictions above that will come true during 2014. What do you think 2014 has in store for the legal industry?