As winter draws in, we’re seeing our US law firm clients begin planning for 2022 – and so we’ve also taken a look at what next year might look like, with the help of both Deloitte’s latest CFO survey and Briefing’s recently published law firm strategy survey with HSBC.
Deloitte’s report highlights inflation and labour supply as two of the top three risks facing businesses, and there’s an expectation among CFOs that operating costs will rise and margins fall. Surprisingly, given that almost 50% CFOs see the level of uncertainty as being either high or very high, they are looking to invest to reduce costs and to drive growth. We’re seeing this thinking translate into the legal sector too – firms are investing.
In fact, we’re seeing a stream of continuous improvement programmes, with firms looking to drive efficiencies, whether that’s in billing processes, new business intake or other, more administrative processes. This is unsurprising, given the findings in HSBC and Briefing’s law firm strategy survey, where 58% of firms identify “peers with more tech-driven business models” as being one of their biggest worries. Putting this into the context of inflation and labour supply constraints, firms are looking to become less reliant on key individuals to make their processes work. The firms that are most successful at this are those that identify small projects and deliver them quickly – those that have developed a ‘marginal gains’ methodology and that can work at pace.
For example, integration is becoming easier and cheaper to put in place, particularly with external data providers. While the cost of data services is high, the data quality improvements, time savings and scalability benefits offer compelling returns on investment. They are perfect examples of the ‘marginal gains’ gains approach, as they can be delivered as small, iterative projects.
The drive to the cloud is also accelerating, due to cost savings around hardware and infrastructure. It is, however, seen as expensive if the firm has been poor at housekeeping and information governance – disk space is not as cheap in the cloud as it is on-premises.
Nonetheless, at firms preparing to move to the cloud, there are three tangible gains: extra disk space, new processes and disciplines governing data, and better focus on the information assets that are most valuable.
Given the nature of the investments CFOs are making, the ‘War for Talent’ is only going to get more cut-throat, as making those marginal gains is difficult without the right expertise. However, firms don’t need each of these specialisms continuously, and some of the skills are hard to acquire and retain. A logical and attractive alternative is to buy in the skills through a flexible service, essentially making it someone else’s problem. Many firms are now looking to engage with outsourcing as a guaranteed way to get the skills in place and ensure they can capitalise on those investments.
And, ultimately, law firms that have the people and partners to help them invest in the technologies needed to reduce costs, increase flexibility and change their service offerings will be the ones that win out.
Article by Christopher Young, Principal consultant and head of risk and BD practices, Pinnacle
This article first appeared in Briefing, Nov 2021.