What are the threats facing law firms as we move into 2020? Some recent surveys suggest that large law firms may need to make some adjustments in order to maintain their market share in the current marketplace.
Potential threats to law firms in this market include:
- More corporate work staying in-house
- Alternative legal service providers and non-traditional law firms
- Law firm networks
More corporate work staying in-house
According to consulting firm Altman Weil in their Law Firms in Transition survey 2019, 63% of law firms surveyed say they are already losing business to corporations in-sourcing more work, including 70% of lawyers in firms of 250 or more lawyers. Another 65% of law firms surveyed think corporate clients are doing more work in-house is a trend that will continue, and an additional 30% say this is at least a potential threat going forward.
Alternative legal services providers and non-traditional law firms
The same Altman Weil survey revealed that some respondents are experiencing loss of business from alternative legal service providers (14%) and non-traditional law firms (7%), and 50% of all respondents say they see the potential threat from both of these sectors in the future.
In addition, 89% of survey respondents say it is likely that competition from non-traditional service providers will continue, and 58% say that demand for law firms will continue to erode in the future.
Law firm networks
The rise of law firm networks has provided resources that small to mid-sized firms have been lacking, allowing these smaller firms to compete for business from companies that might previously only have considered working with large, national, multi-disciplinary law firms.
That’s bad news for larger firms. In the Altman Weil study, 41% of respondents indicated that they saw potential for loss of business to branded lawyer networks in the future. Although another 48% don’t see these networks as threats, perhaps they should.
As noted in an article by Larry Bodine in the March/April 2019 issue of the ABA’s Law Practice Magazine, branded lawyer networks have a distinct advantage over large law firms because, “they can offer a better value because they don’t have the expense of supporting the vast overhead and infrastructure” that large law firms require. And clients of branded networks have indicated that they choose these networks over larger firms because they receive better value on fees and better client service.
These changes – among others – in the legal marketplace mean that law firms need to do more to differentiate themselves in order to compete for business.
How can law firms differentiate themselves in this marketplace?
In response to a question on the Altman Weil survey about whether firms thought they projected a distinct and compelling value that differentiated them from competitors, 53% said they did. The categories in which respondents believed their firms were differentiating themselves were:
- Personal relationships with clients – 61%
- Client service – 53%
- Knowledge and experience – 49%
- Efficient service delivery – 35%
- Flexible lawyer staffing options – 29%
- Depth of resources – 28%
How does this stack up to what clients actually think?
BTI Consulting conducts a corporate counsel client service survey every year, and the 201 9 survey revealed that the four factors ranked highest by corporate counsel on both differentiation and importance were:
- Deals with complexity
- Understands the client’s business
- Uniformity of service
- Client focus
But despite corporate counsel indicating that understanding of a client’s business and a client-focused practice are extremely important, and despite more than half of respondents to the Altman Weil indicating that “client service” is a differentiating factor, fewer than 45% of all survey respondents were making effort to understand clients in the following ways:
- Formal client interview programs
- Industry research and issue spotting (at firm expense)
- Legal issue spotting and preventative law strategies (at firm expense)
- Formal client survey program
- Post-matter reviews
To differentiate themselves in the current marketplace and gain the attention of corporate counsel, large firms need to get serious about focusing on clients and their business beyond just personal relationships with clients.
To address corporate counsel’s desire for firms that can handle complex matters and still provide a uniform level of service across platforms, large firms need to improve their ability to quickly and accurately staff client matters, cross-sell other lawyers and services within the firm that can aid clients with complex matters, and improve internal processes to ensure that service is consistent across all matters and all professionals within the firm.
Recently, a new platform emerged to help large law firms do just that: ioRefer, and if large law firms want to maintain or increase market share, they need to embrace such new technologies. Learn more in the following articles: