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Thomson Reuters
Law firm management

Productivity and profit in times of crisis

Image Credit: REUTERS/Radu Sigheti

The legal sector is braving an extended period of exceptional disruption. Hot on the heels of Brexit and its tumultuous lead up came the COVID-19 challenges.

Nevertheless, the financial hardiness of firms appears robust at first blush. RBS’s legal benchmarking report, in 2019, revealed an average profit per equity partner (PEP) of £128,000 in 2019—£20,000 higher than the previous year. Yet the annual review showed firms’ average profit margin fell from 22 percent to 21 percent, a decline for the third consecutive year, so growth in PEP is coming from an increase in volume which has been reduced by ‘a fall in efficiency’.

Firms need to consider how well-placed they are to resolve operational inefficiencies for greater long-term productivity; but first, firms have had to implement protective measures with little notice.

Furlough and redeployment have been key to firms’ ability to weather the pandemic. Most law firms in the United Kingdom furloughed staff by the end of May, according to research from accountancy firm Saffery Champness and the Institute of Legal Finance & Management, but less than a third expected a fall in profits of more than a quarter this year; and more than 50 percent had also (or planned to) reduce partner drawings in May. However, there appeared a general reluctance to reduce pay.

Further strategic measures

Clive Thomas, Managing Partner at South Wales solicitors Watkins & Gunn, explains: “Externally we’ve changed our systems to allow clients to access our services effectively during lockdown—this has included investing in software allowing remote signing of letters and documents and remote ID checks.” Internally, it introduced team meetings, changed systems to increase cyber security and to allow for supervision during lockdown.

Short-term measures implemented at full-service law firm Ashtons Legal, range from centralisation and digitising of postal operations—which the firm’s CEO Edward O’Rourke says forms one of its longer-term measures. The firm now holds operational meetings three times a week (previously monthly) and weekly management board meetings (previously bi-monthly). Virtual ‘lunch with management’ meetings will shortly be introduced to facilitate a better flow of two-way communication. O’Rourke says all meetings are being held via Microsoft Teams and will continue to be in the longer term.

“Of all the reasons for investing in new technology, client experience tops the list”, says Kirsten Maslen, Director of Market Development at Thomson Reuters. “Law firms are looking at this from the point of view of the client—what would make them easy to do business with.” When you look at it like that, Maslen said it is easier to motivate lawyers to adopt a new solution.

Maslen adds: “In terms of implementation, there’s a lot of experience there to draw on, so the scope of investment and ROI should be relatively easy to quantify”. There are, for example, forums for exchanging ideas and discussing what works.

Spatial awareness

The use of office space looks set to change significantly in the short and long-term. Ashtons has scrapped its planned office expansion and is considering use of the office space as a meeting hub. O’Rourke explains: “The idea of everyone having their own desk is being reconsidered with the anticipation the office environment will have few permanent desk spaces and more hot-desks and meeting areas”.

At Watkins & Gunn, Thomas says they will review which of its many effective short-term changes to keep, along with greater scrutiny of how it uses office space. Thomas says: “we see the return to the workplace as a real opportunity for change—as all of the previous systems and conventions of ‘the way we do things around here’ have been stripped away”.

Neil Lloyd, managing director at FBC Manby Bowdler LLP, an award-winning law firm based in the West Midlands, says the firm will lose about 15 to 20 percent of its total square footage to reduce property overheads. Further longer-term measures including ensuring reductions seen in discretionary overhead spend such as stationery, travel and printing remain low. It will also train staff in pricing techniques. The firm will continue to be balanced in terms of practice areas. “It’s helped us massively not having more than 20 percent in one work type”, Lloyd adds.

Remote working

What of the longer-term prospects for remote working? “The productivity challenge now is about how to really make remote working work”, says Alisa Willows, Managing Partner at Plymouth-based solicitors, Wolferstans. “The challenge is recognising that working from home effectively for the longer-term is not just about handing out laptops, two screens, and the chair they like. It is about how to move it beyond managing—to being more productive than we used to be in the office, without losing the advantages.”

The firm is exploring a more dispersed model but working on how to collaborate effectively, maintain inclusion, and “recreate the chance hallway comment which sparked a thought process”, said Wolferstans.

Willows emphasises that the advantages of taking out property and central infrastructure costs come with “the need to focus on improved supervision, knowledge sharing, outcome focused KPIs, training and team-building”.

Clearly, the business of law remains about the client. Although, while costs need to be carefully managed in line with other businesses, it’s key that firms can maintain lines of communication with clients and each other. This may include virtual consultancies or the hosting of webinars, in order to connect people, share concerns and come up with collective solutions.

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