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5.22.20: COVID-19 Crisis Series LAW FIRM

As its first topic of focus, the Council of Luminaries has decided to have regular meetings to discuss the effects of the COVID-19 pandemic on the legal industry as they materialize. The objective is to identify developments in the market, at their firms, and within their teams, and to explore potential solutions and make predictions on where things go from here. Key takeaways from each meeting will be published for the public following each discussion.

The below meeting was conducted primarily with the law firm leaders group.

This Week’s Temperatures

Each week we ask the Luminaries to answer these three questions, on a scale of 1-10 with 5 being what would have been their pre-COVID response.

Return to Work Plans

In response to a query from the Client-Side Luminaries, the group was asked when are firms targeting reopening offices? How much urgency is there from management/partners to get back to the office, if any?

Most firms, it seems, are targeting to open offices sometime this summer, although without urgency or pressure for people to go back. One firm mentioned that it is targeting a quicker opening office to give people who need to get back for mental health/isolation reasons, but there’s no pressure on anyone to go back. Two other firms reported that they have people going into many offices around the world, but it is important to note that this is consistent with the prevailing norms in those respective jurisdictions. In many of these locations the number of people returning it is limited and with subject to many requirements for everyone who wants to go back, including in at least one case daily temperature checks, mandatory masks and capacity limited to 1/3. Overall, we are seeing a gradual approach for global firms, with not much pressure on anyone to return.

Impact of Work From Home on Service Delivery and Continuity

All agreed that remote working has been largely seamless, so there has been no pressure or risks perceived by clients.

At one firm at least, the partners have felt a need to put a system in place to monitor workforce allocation and utilization since they can’t walk down the hall to see who is working on what. This is helpful for managing existing work as well as capacity planning for anticipated incoming work in the pipeline.

Some firms are using LPM to identify opportunities and benefits of these support offerings with their attorneys, who are now beginning to better appreciate the value of both LPM and the ability to ensure productive remote work.

There are some concerns, however. Court scheduling is an issue in that many trials and hearing are simultaneous, which has caused staffing problems. Others are concerned about pent-up vacation time, which may cause more staffing issues in September or October. Some firms are requiring attorneys and staff to use some time off, even during the pandemic to help avoid a tidal wave of much-needed PTO all at the same time. There may be productivity or mental health issues caused by people’s inability to unplug without going away.

Managing Client Requests

Based on the week’s Client-Side Luminaries Call notes, the group is sensing a disconnect with clients who are requesting highly-customized, specialized process changes to enterprise-level practices or systems that cannot be scaled beyond that individual client. While all agreed that they strive to be as responsive as possible to each client’s unique requirements and preferences, there is a limit to what can be reasonably implemented given the substantial costs financially and in firm staff and resources that can be necessary to develop completely customized technology and process solutions that cannot be used for any other clients.

Clients are not always sensitive to the impact of changes or investments on the firm overall. often it’s positioned as something the firm should take on because it “makes so much money.” However, consideration of firm’s cost basis/margins should be off limits as both law firms and client corporations operate within the norms of their industry, so efforts to opine on how the other side “should” run its business are destined to be unproductive. Sometimes the client will wield relationship value to try to mandate specialized investments by firms which isn’t fair, because not all client relationships are large enough to justify those investments, especially if they can’t be leveraged across other client portfolios. There was a lot of pushback about clients evaluating relationships on how much the firm profits, rather than the value it provides to the client. No other industry sees a dynamic where the buying decision is made as a function of what the buyer perceives is an “adequate” margin for the seller. The buyer has to decide if the price delivers the desired benefits to them. Penalizing operational effectiveness does not incentivize efforts to achieve it.

Furthermore, sometimes clients need to think more about what they’re asking for and whether it is really what they need. Often a client has a preconceived idea of the solution to their problem and requests that without exploring the nature of the problem and the merits of different solutions with the firm (or vendor). It’s best to start the conversation with the goal of what the client wants, rather than their opinion of what the tool is for the job. This applies not only to technology but also to innovation, collaboration and fee discussions. Sometimes there’s a lot of education on business models required before a meaningful conversation about specific solutions can be conducted.

Educating Clients

The above are multi-dimensional challenges: We shouldn’t need to educate clients on the way we do business, but we do have to be careful and sensitive to it. Sometimes it is worth the time to train or educate clients where there are gaps in sophistication because it makes life easier for all.

The most dangerous situation is when you are dealing with a client representative who knows buzzwords but not economics and frameworks—sometimes new legal ops people who came from a different area fit this description. Also, firms have had more time to figure out how to deal with these issues than many clients have simply because clients demanded ingenuity and greater flexibility as a function of the 2008 recession, which set the course for the law firm specialists who focus on this work today. Clients did not start adopting counterpart roles in legal ops until several years later, so timeline and evolution are factors. Also, the demand for law department operations strips out supply, and consulting and law firms tend to pay better, which creates challenges for developing and retaining professionals with sophisticated skill sets. Even inside firms, however, there is still a need for more development of pricing, LPM and innovation professionals as the number of these individuals needed far exceeded the population of those with advanced training and experience.

These misalignments of understanding can be counterproductive and appear to be unappreciated in some circumstances. Clients asking for proposals on solutions and agreement terms that they ultimately don’t have objective frameworks or capabilities to evaluate is often a frustration among law firms. A lot of work and investment often goes into crafting concepts, building solutions and investing in tools and talent that comply with a client’s stated goals, only to be discarded by clients who ultimately embrace traditional approaches when the challenge of evaluating the new ideas and validating their benefits against the old ways proves too great. Another challenge in these interactions often takes the form of clients telling their firms that they are fungible and will be replaced if price demands are not met. This substantially damages the collaborative spirit that underlies successful partnerships and truly progressive ways of reducing friction. Who wants to try hard and invest time and energy in something when the other side takes an aggressive, unappreciative or adversarial stance?

Opportunity cost is a foreign concept to many lawyers at firms, so to many partners every client request is interpreted as a take-it-or-leave-it demand. They don’t realize they can sell those hours elsewhere, often easily to existing clients who place a higher value on their expertise and contributions. This is hard to fix unless the firm’s pricing professional has credibility internally.

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