While I have been going on in several blog posts, podcasts and recent speaking engagements, about the renewed need for process improvement and project management in the legal profession, much of that was based on my prediction that we were heading into an uncertain economy, akin to another 2008 Great Recession scenario.
Initially, alternative fee arrangements and the new legal business models changed the landscape, necessitating more focus on efficiency and value, pricing strategy, and above all, business development with a competitive edge as many alternative legal service providers (ALSPs) jumped into the game and started going after the commodity-type work. However, this may not have moved the needle enough on real systemic change in the industry. Further, smaller law firms were finding it difficult to be competitive under the 2008 version of a new normal, and many of them were either acquired by larger firms or they simply closed up shop.
As we look back on 2019 and early 2020, I had been predicting another recession and basically advising law firms that while some of the Great Recession-era new normal changes are still valid, they are in fact going to be resurrected during this current economic crisis brought on by the pandemic.
Relying on proven tools
As we begin to assess what the post-pandemic new normal might look like, I think it would be wise to review what changes the Great Recession wrought and what tools and methods law firms used to successfully adapt to these challenges.
Indeed, one could see how going forward, firms would be well served by the application of more process improvement methodologies and a revamp or deeper dive into project management. Project management was a big game changer in the last recession, and helped firms promote their core efficiencies and value propositions that clients said they wanted to see in their outside counsel.
Before the pandemic, I was advising law firms that under the new new normal, process improvement and project management would take a more strategic role than in our last recession. Keep in mind, the 2008 recession hit hard, and as a result, law firms got more and more pushback from their clients on hourly billing, to the point where strategic pricing was imposed. Before long, boutique law firms were performing all legal services under a flat fee arrangement or other pricing strategy. The legal profession was basically thrown into the fire and had to be ready with some quick fixes in order to keep clients happy and address the needs for efficiency and pricing that clients now demanded.
There was no magic wand in 2008. Everyone became an expert, and many law firms dove into the pool without checking the water’s depth. Many firms sustained deep losses while experimenting with pricing, but eventually some found their way and managed to get it reasonably right.
What was the problem? There was no formal structure to understand or propose alternative fee arrangements or other pricing strategies, other than sifting through the firm’s historical data and trying to get in line with legal service budgeting. It was like playing Twister in the dark! You think your law firm went right foot “green for profit”, but did it? Or, did it go “red for losses” instead?
Now that we have this current pandemic on our hands, in my view, the recession that I had predicted for later this year has only accelerated. Once again, law firms are now confronted with a new set of challenges. Not only will firms be working with a questionable economy for the next year or so, but this will be compounded by firms going into immediate virtual or remote operating mode for the foreseeable future.
Return of the virtual firm
While the idea of the virtual law firm is not new, they’ve seen more failures than successes, for a number of reasons, ranging from economic to social. It’s important to note, however, that going into immediate virtual mode has brought to the surface all of the operational and logistical issues that are now seen as problematic. Further, it’s interesting to note that some of these operational and logistical issues may have gone unnoticed for a considerable time, but now that law firm culture and logistics went virtual, it shined a light on the many inefficiencies that law firms may have ignored or not have even known existed.
That means that as law firms continue on (for the time being) in a virtual mode, the timing and execution of processes and the management of those processes are critical, leaving many law firms to address or quick fix many of these issues on the fly. What is even more interesting to me is that some of these quick fixes are doing the trick and whether law firms realize it or not, they are diving headlong into process improvement and management mode.
Indeed, some of these quick fixes could potentially be quite innovative and offer solutions that will outlive the crisis. I am confident that many firms will use this pandemic pause to move more quickly towards innovation and efficiency by, among other things, facilitating the delivery of timely and responsive legal services to their clients. Clearly, the relationship between urgency and arriving at innovation has created opportunities for law firms to make needed process changes that will carry over into the firm when those law firms are fully operational and back in their respective offices.
In order to get from A to B, however, firms need to embrace fast-track process improvement methodologies. This is an area that is unique to each law firm, of course, because there are so many aspects to consider, such as culture, practice areas, staffing, and so forth. However, the premise remains the same.
Throughout the legal industry, I think firms will be increasingly working with process improvement methodologies, even if it is not in the standard DMAIC approach (DEFINE, MEASURE, ANALYZE, IMPROVE, CONTROL) that we’ve discussed in the past. It’s clear to me, however, that the pandemic is bringing process improvement and project management tools into the mix, perhaps sooner because of the crisis, but eventually, their adoption will be based on the economic trends.