With US firms becoming more dominant internationally, so is the scene set for increasing rivalry between them and the leading UK set – as each vie for a place among the global elite. The competition will be played out in a context of increasing operational innovation, new business models, the rise of alternative providers and cognitive technology. Opposing forces of conservatism and innovation will battle it out for supremacy, resulting in a legal profession that may be very different come 2040.

This is according to a feature, ‘Coming soon’ published in the June 2015 issue of Legal Business. The piece assesses the big forces impacting the legal industry and considers how these could shape the law firm of the future.

In this, our first quarterly market update, we take some of these longer-term predictions, and combine them with our own ‘on the ground’ insights, to give our view of where we think the legal profession is heading in both the short and long term.

We hope you find this report useful and welcome your feedback.

The international marketplace

Overall, we are seeing much more strategic thinking around overseas investment. Legal Business states that the age of aggressive globalisation is over: ‘Far fewer flags will be planted in the next 25 years than in the previous 25.’ We agree. We know that some firms have retained a strong focus on international expansion, but a growing trend is to only open overseas ventures to meet specific and targeted client needs.

At the same time, though, the London market is both saturated and mature. Many firms are finding that more revenue is coming in from outside the UK. This means that they are carefully reviewing their business models to maximise the potential of their overseas investments.

As part of this, we are working with firms that are keen to present themselves as truly global networks. We are handling a rising number of business services roles in Europe, for instance, and they are taking on a broader focus – so a new marketing and BD position in Germany is more likely to have a ‘global’ than ‘European’ orientation.

We are seeing real investment into business services in regions beyond Europe too, with many more new positions in various different locations. Africa is proving popular for UK-centred firms that have struggled to gain ground in the US. And recruitment in the Middle East and Asia continues to thrive, propelled by the two major mergers of King & Wood Mallesons (KWM) and Dacheng Dentons.

Reflecting the rapid growth in these regions, we find that roles often allow candidates more responsibility more quickly, and with considerable partner and client contact, than those on offer in UK firms with larger business services teams. There are often fewer rungs to get to the top and less bureaucracy to tackle. We know of a Head of PR at a leading international firm in London who moved out to Asia to take on a broader marketing and BD role. He is now COO of the firm’s Singapore office. It’s a great example of the career development opportunities available overseas for the most talented candidates.

We find this investment an encouraging sign of intent. One outlook presented by Legal Business is that as US firms become more dominant, innovation among law firms could stall as they tend to be ‘highly conservative’. We too have worked on roles in the US market that lack the sophistication of business services roles in the UK and Australia.

But we remain convinced that as more business services professionals prove their value across the globe, it will only become harder for firms to turn the clock back, no matter which firms assume ascendancy. And this is only more the case where some firms are proving ever more willing to push at the established boundaries of traditional legal practice.

Structural innovation

It is in this respect in fact that we are seeing changes that we think are monumental. We think a really significant trend is the rise of what Legal Business describes as the ‘hub and spoke’ approach, in which the ‘core’ and more traditional legal business is surrounded by different and often more flexible operations.

Specific examples include a rise in near-shoring, with firms such as A&O and Herbert Smith launching legal services and support centres in Belfast. Others have followed including Ashurst in Glasgow, Hogan Lovells in Birmingham and, more recently, Freshfields in Manchester.

The cost-saving rationale is obvious – clients are demanding more for less from their law firms, and near-shoring offers an obvious means for cost-efficiencies, in more familiar and manageable setting than some of the far-flung offshore destinations. As recruiters, we are working hard to ensure we can support a good and growing pool of candidates in these regions as firms ramp up their support capabilities here and others jump on the bandwagon.

New legal offerings

But significant too is the rise of separate, subsidiary businesses under a law firm’s umbrella brand. Berwin Leighton Paisner’s Lawyers on Demand (LOD) has grown considerably, not just offering contract lawyers but now project management services too, either in-house or ‘on call’.

Other firms, including Eversheds and Pinsent Masons have launched similar services. But it was perhaps A&O that made the biggest wave by becoming the first magic circle firm to get in on the act, launching Peerpoint in 2013. With other firms such as DLA Piper, Bird & Bird and Dentons also launching separate advisory businesses, we see this as a burgeoning opportunity for firms to broaden and diversify their offerings, while not diluting or diminishing their core offering in high value legal services typified by the partnership model.

This trend will only be further reinforced by alternative business structures opening up options for external funding, and giving firms the means to develop wholly new business models for subsidiary operations. Legal Businessdescribes such divisions as potential ‘breeding grounds for fresh thinking and operational innovation’. We entirely agree, and would go further to suggest that such businesses could soon rival, or even prove more successful, than some of the firms that spawned them.

Rethinking business services

We also find this kind of thinking spilling over into the specific business services functions that we are working on. In the spirit of innovation, we are finding many firms rethinking their business services teams and what is required from them to meet an array of new and evolving client needs.

We know some firms that have conducted wholesale business services reviews to ensure functions are equipped to manage changing and increasingly sophisticated requirements. Salaries – particularly at director level – are on the rise, and firms are adding to their headcount across all functions, all of which is keeping us busy.

A highlight is in HR, which we now see as more connected into the business than ever before. Senior HR professionals supported their firms through some tough decision-making during the recession and are now highly valued. In particular, we have seen a number of internal moves from HR into COO roles, demonstrating real potential for this function at leadership level.

Technology is back too. We have placed more IT directors into law firms in the past six months than in the past five-six years put together. Technology is once again seen as the key competitive differentiator, and firms are seeking a new breed of IT director who can bring with them the kind of commercial acumen to put the business ahead of the curve.

The rise of project and process management

But perhaps most significant of all, in our view, has been the shift towards project management and process improvement. We have expanded the Totum team across all functions in recent months, and moved to a bigger office in the process.

But it is our recent recruitment of senior lawyer Kerry Quinn that has been the biggest single change for us, as she is heading up an altogether new team, focused on operational management and specialist roles including project, process management and risk.

While some firms have already established central project management teams, for many it is a whole new remit and they are still feeling their way with what such roles should look like. With rising demand, firms will increasingly need to source expertise from beyond the legal sector. This will bring into law valuable new capabilities – but firms will need to be careful to remain open minded about the skills and salaries offered by different industry sectors to ensure they can offer suitably competitive packages.

Interest, however, is high. Firms are increasingly recognising that expertise in project management and process improvement could provide an important means for transforming the operations of the legal business and opening up new avenues for further legal services innovation. We only expect further growth in this function in future months and years.

The future game

In its ‘Coming soon’ piece, Legal Business asks whether the innovative business model of UK firms will spread to the ‘far larger but more conservative US legal market’, or become the ‘stark differentiator’ between the two dominant common law markets. In our view, the kind of initiatives currently being explored by UK firms can’t be turned back or overlooked.

Whether launching new contract and advisory businesses, or further developing the sophistication of business services teams, we see firms undertaking endeavours that are together transforming understanding of the legal business and the services it can offer. This is often in response to client needs, but it will shape too their ongoing and evolving expectations. A firm that is unwilling to at least review the rule book cannot adapt – at a time when challenging assumptions seems ever-more critical to securing business sustainability and growth.

What law firms will look like in 2040 may be anyone’s bet. But, in our view, successful innovation will breed only more of the same. For us, the future of law will lie with those that are willing to be game-changers.

Tips and recommendations

  1. Firms are often looking for business services professionals who are top of their game and have both commercial expertise as well as significant experience in a law firm environment. This isn’t always possible – especially in newer roles such as project management. We urge firms to consider (and support the integration of) those candidates that may not yet tick all the boxes, but have huge potential to succeed.
  2. In this respect, remember that talented candidates from outside the sector may be more likely to have the ideas to innovate and the commercial expertise to drive through change.
  3. There remains a perception in the market that law firms are archaic and slow to change, with limited career development opportunities. Consider how you support business services professionals through to leadership roles – and how you ‘sell’ this to as broad a talent pool as possible.
  4. In newer roles, ensure the salary you are offering is commensurate with the skills and experience you require. Securing the best talent in new skills from outside the sector will require careful consideration of the types of roles, salaries and bonus structures on offer in the broader market.
  5. The younger generation are increasingly expecting career mobility, including international experience. And many law firms can offer great career-growing opportunities in this respect. Consider how you can promote your global network and remember to factor the international dimension into job specs and on-going career development plans.

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