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Leadership, Growth, and Profitability in a Post-Pandemic Era: New Report Focuses on How Modern Law Firms Are Navigating Digital Transformation

 By Ari Kaplan, Ari Kaplan Advisors [Sponsored Post]

In collaboration with Affinity ConsultingiManage, and SurePoint TechnologiesI was fortunate to interview 18 chief operating officers, 10 executive directors, one chief executive officer, and one chief administrative officer at law firms, with a median of 140 professionals and 73 lawyers, between February 21, 2023, and March 15, 2023, to better understand the most promising areas for growth, best practices for change management, and how firms can continue to thrive in an uncertain economic climate.

The new report – which you can download in full at Leadership, Growth, and Profitability in a Post-Pandemic Era: Insights on Navigating Digital Transformation in the Modern Law Firm – emphasizes the connection between legal technology and law firm success, the importance of training to ensure technology adoption, the influence of automation and document management on digital transformation, and how law firms are deploying data to create a competitive advantage.

Introduction

Leadership is fluid and by definition requires an ability to navigate across expected and unexpected paths. In fact, modern leaders need to be simultaneously proactive and reactive. And in legal, they need to deftly honor tradition and strive for change without disrupting an inherently delicate balance between technological progress, generational shifts, and complex business dynamics. In describing the current environment, one executive director noted, “Not only were we keeping the spinning plates in the air before the pandemic, now someone has lit them on fire.”

For many leaders who participated in this survey, the legal field is at a watershed moment that offers them the chance to reimagine law firm management and to influence a new era of success.

“Now is the time to completely reinvent everything we are doing; we need to constantly pretend we are a brand-new law firm and change what we are doing in ways that are different from the past,” remarked a participating COO.

And the results are consistent with that view:

90% explained that legal technology helps their firms increase revenue.
90% agreed that reliable, timely data can gain a competitive advantage.
77% reported that the skill set required for law firm leaders has changed.
73% have access to the data they need to make informed business decisions.
70% reported that legal technology helps drive the growth of their law firms.
63% work at firms that automate frequently created documents.
47% have altered their approach to change management.
43% provide leadership training for new leaders.
40% are automating their repeatable processes.
37% are exploring other service delivery models, such as selling products, rather than selling hours, to increase profitability.

The Skill Set Required of Law Firm Leaders Has Changed

From carefully piloting a return to the office and embracing better business operations to deploying new technology and maximizing prospects for growth, the participating law firm leaders emphasized many areas of opportunity today, but the skills to seize them have changed. “You need to be adept at managing a broader array of people with different capabilities than ever before,” offered the COO of a larger midsize firm. “It is important for all leaders in law firms to have a very strong business sense,” explained another COO. “Now, more than ever, financial acumen and an understanding of data analysis are critical; budgeting and forecasting are much more important,” added an executive director.

Harmonizing Hybrid Work is a Critical Challenge for Leading a Law Firm in 2023

Many skills required of new leaders have become more important or changed as a result of working in a less traditional manner. In fact, only 20% of the participants serve in law firms that require their employees to work in a central office five days per week. While 80% do not, most have certain parameters, and 57% either expect or aspire to see their lawyers and professionals in the office at least three days per week. This continues to be a fluid challenge.

Midsize Law Firms Can Expect Growth in Various Areas

The economy is presenting new opportunities for law firms that can provide quality legal work that is value-centric and exceeds client expectations. “Midsize firms that are smaller than the mega firms are well-positioned from a value proposition to become the law firm of choice for companies being impacted by a sluggish economy; there are also openings for firms that effectively deploy fixed fees because clients are looking for new value propositions,” said the COO of a larger midsize firm.

The Alignment of Data, Profitability, and Metrics are Driving Law Firm Success

As they expand their technology and processes, firms are becoming more sophisticated stewards of their data. “What you don’t measure, you don’t manage,” said one COO, who added that “alternative fee arrangements are only successful if you can develop relevant KPIs and can guide the process.”

While most reported tracking billable hours, realization, and collections, there were others who are using KPIs more strategically. As one marketing leader noted, “The report validates the crucial need for firms to adopt data-driven approaches for using technology, tracking KPIs, budgeting, and developing their artificial intelligence strategies.” Adept Leaders Are Simultaneously

Driving Innovation and Overcoming Resistance to It

10% of the participating leaders reported spending between 31 and 40 percent of their job on strategy and innovation. 17% spend 21 to 30 percent, 27% spend between 11 and 20 percent, and another 27% spend up to 10 percent. “It is a big part of our job, especially because we are in the midst of a strategic planning initiative,” said one COO. “I wish it was more than it is because leaders should spend more time strategizing than putting out fires,” noted another.

Training is Critical to Technology Implementation and Adoption

10% of the participants reported that their law firms provide technology training for new leaders and 43% offer leadership training for new leaders, so there was a common theme of driving the adoption of new tools through hands-on instruction. “This research shows that technology is clearly a strategic asset for competitive, client-focused firms looking to grow and thrive,” said Debbie Foster, CEO of Affinity Consulting Group.

Automation and Document Management are Foundational Elements of Digital Transformation

There was broad recognition among the participants of the need to incorporate automation and robust document management tools into their portfolios. In fact, 63% of the respondents work at firms that automate often-created documents. 70% are documenting their repeatable processes, 73% are creating workflows around their repeatable processes, and 40% are automating their repeatable processes.

“Over the last 18 months we have made a huge push for document automation,” noted an executive director. “We automate certain accounting processes, such as new matter intake, expense reimbursement, and reporting,” offered another executive director.

Legal Technology is at the Core of Law Firm Growth, Revenue Generation, and Client Service

Technology is a clear enabler and catalyst for growth, revenue generation, and client service at many law firms, including those at which the participating leaders serve. 70% of the responding leaders reported that legal technology helps drive the growth of their law firms, 90% revealed that legal technology helps their firms increase revenue, and 100% noted that it helps their teams deliver better client service.

For many, the use of technology increases speed, enhances accuracy, and empowers responsiveness. “Today, clients want a quick turnaround so if technology allows us to respond more quickly and easily, they are happier,” advised one COO. “To the extent that the technology allows access to accurate information in a quicker more efficient way, it improves client services,” offered another.

Conclusion

Law firm leadership has become a multifaceted, intergenerational, and tech-enabled test of 21st-century organizational management. While it still requires financial acumen and business savvy, those running law firms today serve as chameleons that combine a much deeper understanding of social dynamics, an aptitude for communication, and the ability to bring a range of visions to fruition. “Leaders cannot force change, particularly at the precipice of generative AI and legal automation, so they need to invest in understanding and exploiting emerging tools to gain a competitive advantage,” said Laura Wenzel, the Global Director of Product Marketing at iManage.

This research is designed to showcase the opportunities they see in the near and distant future and highlight the challenges that may impair their ability to achieve success. Whether the obstacles are retaining talent, returning to the office, or deploying artificial intelligence, the most successful leaders combine an appreciation for the foundational traditions that have historically driven law firm growth and the need to guide their entire team of professionals into a more uncertain, yet promising future. The post-pandemic law firm trajectory remains a challenge to navigate, but it is a journey built on trust, skill, and collaboration.

Ari Kaplan is the principal of Ari Kaplan Advisors and an independent analyst that covers the legal industry.

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