Originally published in The Legal Intelligencer
Many economists today predict a K-shaped recovery for 2021: some sectors of the economy will bounce back quickly and sharply as we enter a post-pandemic world, rapidly returning to pre-COVID heights (if not higher). Others, such as largescale events or hospitality, for example, will be slow to rebound, facing longer-term repercussions as companies and people simply do not revert to former ways of doing things. For the legal industry, much of which has suffered more of a minor scratch than a major blow in 2020, what does 2021 have in store? It depends. Some legal service providers will thrive, even flourish, in the coming years. Others, mirroring the K-shaped model, will have decidedly bleaker outlooks. How can a firm know its fate?
For the legal industry overall, a K-shaped recovery sounds like a boon. The parallel upward trajectories of both cyclical and countercyclical work will provide larger, full-service firms with a wealth of opportunity. Growth prospects are higher even than in recent years. An active transactional market, an onslaught of backlogged litigation, a spate of new employment issues and a surge in bankruptcy filings will spur demand. Plus, a new political regime, likely to include renewed interest in infrastructure and clean energy and sweeping changes in tax, regulation and environmental, will further spark market expansion.
Against this backdrop it is difficult to see the downside. However, as at least a handful of firms already know, not every firm is positioned to take advantage of this potential upsurge. How firms responded to the dynamic changes of 2020 and how effectively and proactively they approach 2021 will determine whether they come out ahead. Successful firms will have made – and will continue to make – their mantra to be deliberate and intentional. In the face of sweeping changes and remote work, no other strategy will yield optimal results.
While most firms fortified their operations in 2020, making structural changes to reduce overhead expenses and boost reliance on technology, only the top performers simultaneously laid a solid foundation for longer-term growth. Defense-only firms hunkered down, scaled back on client outreach and business development and emphasized cost-cutting over smart spending. The refrain from leaders at these firms was one of “wait and see,” with the suggestion that “clients have a lot on their plates right now; we are here for them but will not bother them with business development calls.” Partners floundered, wondering what to do in this new environment. Internal departmental budgets from marketing to professional development to recruitment were slashed alongside salaries, most often for support staff but also for Associates and Partners.
Blanket spending freezes were common in 2020. Yet while protectionist firms maintained these long enough to result in some of the most profitable years on record, firms with a longer-term lens evaluated changing needs and put the right dollars back into play as quickly as possible. Investments either in high demand areas, such as pricing and billing support, financial analysis, technology and communications, or in areas with high expected payoffs, such as selective recruiting, professional development, or even awareness-building, took precedence. Restoring salaries or even rewarding talent with bonuses or raises came next, with leading firms attempting to rebuild confidence.
Perhaps the greatest distinction between those firms poised to reap rewards in 2021 and those not, though, is in how each approached client and talent engagement in 2020. While many firms – and lawyers – fumbled, reluctant to continue client outreach in the midst of the pandemic, others leaned in. While some adopted a “business as usual” policy with Associates and staff, others reevaluated. Partners with especially high EQ or strong relationship-building skills leveraged these strengths to build deeper connections. They called clients, checked in on Associates and staff, and demonstrated genuine interest in people’s well-being. Similarly, firm leaders with the same mindset institutionalized these efforts, providing guidelines and training to lawyers and staff on how to engage with clients in unusual circumstances, encouraging outreach and setting the right tone with respect to the importance of dialogue and mental health.
Forward-looking firms, also, did not lose sight of the market opportunities. Some repurposed and retrained lawyers to support bankruptcy. Others leaned on pricing advisors to devise innovative, sound ways to offer alternative billing options to clients, often proactively. Still more explored and invested in the diverse and growing needs in talent development and culture, with a handful making significant and notable strides in acknowledging the need for holistic, top-to-bottom approaches to truly advance DEI efforts. In short, the top performers deployed a combination of offensive and defensive tactics to stay not just in but ahead of the game.
Consider an analogy – a youth football or soccer tournament perhaps, where one team is playing strong offense, making moves to unseat the competition; a second team is standing up a powerful defense, protecting its turf, though not necessarily gaining advantage; and a third team is combining both tactics for a winning strategy. The same is true of law firms – those who make both offensive and defensive strides in 2020 are in a stronger place for 2021. (As an aside, we would be remiss not to extend the analogy to include those players, common in youth sports, daydreaming in the middle of the field while others make moves all around them. Those, too, exist in among law firms and can expect to be knocked down by the force of what’s to come in the next 12-24 months.)
Fortunately, for those firms that engaged in more defense than offense in 2020, the game is not yet lost. While the advantage goes to those firms that already made the right moves, the wealth of opportunity 2021 promises is still within reach for others (admittedly, perhaps not the distracted midfielders.) To capture a piece of what the coming year may offer demands leadership and aggressive action. A punch list of how to approach the year:
Strategy 2.021. First and foremost, every firm must take a renewed look at its strategy – no industry or geographic region is left unchanged by the collective events of 2020. Evaluate the positions of individual clients alongside prospects for their industry sectors and global operations.
Anticipate talent wants and needs. Work-from-home is no longer merely an idealistic concept reserved for punchy start-ups or whimsical tech companies. The ability to attract and retain talent will hinge on how law firms respond to demands for flexibility which are higher than they have ever been in the legal industry and beyond.
Diversity matters. Diversity efforts centered around tracking metrics and mandatory training are so 2020. Organizations are finally acknowledging the link between diversity and culture and the need for comprehensive assessments of culture, belonging, toxicity and more to create inclusive environments where all people can thrive. Educational programming is not enough.
Connect with clients. The pandemic opened up people’s lives, literally allowing partners to enter their clients’ living rooms, virtually, if they made the overture. As long as remote work continues, and hopefully beyond, the opportunity to create personal, lasting connections with clients is stronger than ever.
Lateral boom, anywhere. To those firms willing to entertain the possibility, the lateral market for top talent in markets outside of the firm’s geographic footprint creates a whole new adventure – and, potentially, value proposition for all involved. Be sure to get a tax specialist involved before making any major steps.
Elevate the analytics. Whether to anticipate the flexibility clients will need around billing, to ensure profitability of existing and new ventures or to evaluate market shifts and opportunities for the firm and its clients, investments in analytic capabilities (and the data clean-up to use them) are long overdue.
Arizona, Utah, California, oh my. In the wake of all else that happened in 2020, it is easy to overlook recent moves to permit or pilot outside ownership of law firms. While for some regional firms this model is still a hypothetical, for virtually every national or international firm these changes, alongside Big 4 investments in U.S. legal tech, alliances and more, signals a real and increasingly imminent threat.
Leadership and the long game. Finally, someone to lead it all. With just a third of law firms offering any kind of leadership training and those that do averaging just 11 hours annually, it is imperative firms step up their educational game to ensure existing, incoming and emerging leaders have the tools, self-awareness and coaching to lead this transformation.
It is true this crisis has, in many ways, offered a silver lining to law firms – and with 2021 promising even greater returns it will be tempting to continue to play the game the way the firm always has, minding financial health and awaiting return to “normal.” This time, though, what if normal never comes? What if our shared experience has permanently and irrevocably changed the fabric of who we are as people, organizations, and cultures? Playing the offense and making the right moves can not only help position the firm for growth, it may, in some ways, be what is needed to simply continue to exist.