According to the recently published 2017 Altman Weil Law Firms in Transition Survey, the portion of law firms experiencing positive revenue growth upwards of 4% has remained relatively stable since 2010, sitting comfortably around 40%. This is a feat, considering only 25% of firms experienced growth at this level after the financial crash in 2009. And it is clearly not a population that is increasing.
While we don’t have insight into the makeup of this group or the relative stability, we can extrapolate given what we see with other high performing groups. Primarily, a portion of the group remains the same year-to-year with the remaining firms bouncing in and out. Additionally (and possibly most importantly), is that even within this group that sees substantial revenue growth, there is bound to be a dispersion of winners pulling away from the pack with far greater growth than that of their cohort. This was a topic given a lot of attention in the recently published 2017 AmLaw 100 report, as the top four firms aggressively pulled away from the pack while the rest were left to fight it out in the muddy middle.
In this environment where not all boats rise with the tide, understanding what firms are doing to pull away from the herd is a curiosity. The muddy middle seems to be swallowing a vast majority (~51%) of firms; and these firms vacillate year-over-year between barely negative and barely positive growth not only in revenue but also in demand, as well as other metrics like revenue per lawyer (RPL) and profits per equity partner (PPEP). Indeed, this is an endemic trend that is hitting large and mid-size firms alike.
The competition is fierce and no longer a battle among law firms in the same peer group. When looking broadly, the demand for legal services is growing, however, the portion that goes to law firms is not. As it has been widely written about, work is spilling over to legal disruptors and even more so, staying in-house at an increasing amount each year. Firms must find ways to innovate to not only keep their share but also win new business in order to grow their top-line.
There are numerous ways that a law firm can invest in innovation to drive growth. We hear about it daily… firms pursuing technology, data analytics, AI, new business ventures, efficiency initiatives, staffing improvements, process engineering, client programs, pricing strategy — the list goes on. Among all these initiatives, one theme shines through, a focus on improving service delivery — an area that is seen to be absolutely necessary to be able to serve a more sophisticated client with niche needs.
High-performing firms recognize this phenomenon and continue to invest in it, according to the 2017 Intapp Experience Management survey. Specifically, firms that have strong revenue growth are leveraging systems, processes and data to systematically innovate the client development function to win more business. Looking at the particulars, 35% of law firms are doing this through experience-management platforms while the remainder are planning to invest in a system within the next year.
When digging into the use cases of experience management, it becomes clear this trend is happening. To name a few reasons:
- Winning new business — With data readily at your fingertips, business development and marketing teams can quickly respond to pitches, proposals and RFPs with relevant information that outline the firm’s expertise in the client’s industry and matter, as well as identifying a strong team to meet those needs.
- Laterals — A frequent practice in the current market, lateral moves are commonplace, with partners and entire practice groups picking up and finding a new home. This presents a host of problems from the gap that is left at the prior firm to the integration and knowledge-share needed at the new firm. It’s no longer enough to rely on one’s memory to know if a lawyer at the firm has bespoke knowledge in helicopter financing in Zimbabwe. In this instance, an experience-system shines through hosting a plethora of knowledge for lawyers new and old, enabling cross-selling opportunities that a firm may not have even had known were possible.
- Succession — As partners enter retirement and lawyers leave for other opportunities, it is increasingly more important to create a stickiness between the firm and the client so a lawyer’s departure doesn’t equate to a loss. Naturally, it’s key to find the next best fit at the firm to nurture and foster that relationship so that the firm can continue to rely and grow that business.
- Collaboration — In the same vein as lateral integration and succession, understanding the collective knowledge of the firm and the individuals that make it up, allows lawyers a level of visibility they may not have had before. Current tactics rely on memory and mass emails, which has its limits. With limited knowledge of where expertise lies within the firm, collaboration and cross-selling can be a difficult feat. A firm’s experience-data should enable this rather than be a hindrance to productivity and cross-serving.
- Branding — A strong brand has proven to be beneficial to top-line growth across professional service firms. With it comes a reputation for certain knowledge and the ability to deliver on client needs. A law firm’s product is not only the individual experience of each lawyer, but also the collective knowledge that makes a firm’s ability to market it unified expertise so imperative in keeping and capturing new business.
- Pricing — Transparency and consistency is now common nomenclature used by clients, along with a need for a strong pricing strategy in order to secure new business. This, of course, requires the ability to find similar matters to understand the type, time and resources involved to be able to then provide an accurate pricing plan and the ability to track to it.
Each one of these use-bases has a strong revenue generation undertone, with some more direct than others. There are many other areas a firm may invest in as well in order to drive revenue growth. However, the exponential value of an experience-system on a firm’s top-line is beginning to shine through. With the changing market and shifting needs of clients, accurate information and the visibility to access it will enable lawyers as well as marketing and business development pros to drive revenue growth proactively.