NEW YORK — Transforming Women’s Leadership in the Law (TWLL) kicked off the third year of its Rising Stars cohort last week. Nine women partners attended the event to hear Thomson Reuters EVP and General Counsel Deirdre Stanley moderate a conversation with Janet Stanton, Partner at Adam Smith, Esq., Ann Stanley, Managing Director in BNY Mellon’s Legal Technology and IP practice, and Kim Desmarais, of Thomson Reuters Peer Monitor.
State of the Legal Market in 2019 and Drivers of Change
Desmarais kicked off the discussion by highlighting the macro-trends in the legal market as well as the key drivers behind them. She started off stating how demand for law firm work has been flat with, at best, an increase or decrease in growth of between 1% to 2% since the recession. Most notably, 2018 was the first year since 2013 that the large and midsize law firm markets all ended in positive territory for overall growth. Desmarais explained that drivers of these trends include:
- Shift in Purchasing Power — The main driver of change has been the shift to a buyers’ market as corporate legal departments hold sway with the power of their legal spend. Still, in-house counsel continues to be challenged by the need to control costs, forcing them to look for service providers that can provide better pricing policies, process improvement methods, and innovative technology.
- ALSPs — The growth of the legal services market taken by alternative legal service providers (ALSPs), which now includes the Big 4 accounting firms, has increased steadily, and now roughly represents $10.7 billion dollars of revenue and growing.
- Law Firm Consolidation — Another driver of the decline in demand is law firm mergers. Many law firms think getting bigger is better, and there were 106 mergers in 2018.
- Tricky State of Financials — While law firms are continuing to increase their billing rates by 3% to 4% each year, these moves have not resulted in increased profits, primarily because firms’ realization rate is at an all-time low at roughly 83 cents on the dollar.
- Technology and Talent Investments — Firms are buying technology to help drive efficiency, and these investments are one of their biggest areas of expense growth. Also, law firms are making big investments in non-lawyer talent, including hiring skilled individuals in business roles, such as pricing specialists, project management professionals, and C-suite personnel to help run the firm like a business.
Do Clients Have Long-Term Loyalty to Law Firms Anymore?
Next, Adam Smith’s Stanton shared her guidance with the women partners on ways they could better stand out to their clients. As their buying power strengthened, clients’ loyalty to favored law firms has waned, leaving the firms scrambling to work extra hard to keep their business.
One way to secure that loyalty, Stanton advised, was to be knowledgeable about your clients’ operations, challenges, and market pressures. “Know your client and know your client’s business,” she said. “It is much easier than the practice of law.” Among the biggest “gripe clients have with their lawyers is that they don’t understand their business,” she noted, adding that “expert legal advice just gets you to the starting point.” Stanley added that benchmarking a company’s practices against peers is invaluable information that law firms can offer to clients.
Law firm partners should be asking their clients what they value and “build your service around that,” she said, suggesting partners could stay up-to-date on what clients are doing by engaging “an MBA candidate to do a modest bit of research for you” and setting up “Google Alerts for your clients — so you’ll be up on the latest developments.”
How to Drive Value for Clients
BNY Mellon’s Stanley and Stanton both offered simple ways to be an asset of commercial value. Stanley underscored the important of the economics, emphasizing how her legal department has leveraged a panel of selected firms to manage legal spend. Echoing that, Stanton suggested that because of these resource constraints, women partners could “provide on-site training to their clients.”
Ultimately, it boils down to making “tangible business contributions to clients” and “investing in the client by setting up off-the-clock visits to get to know them better on the firm’s dime,” suggested Stanton.