Future firm: Will your business be road-kill in 2020?

New social media, technology and outsourcing solutions will transform legal firms over the next decade and play a role in culling those which cannot keep up with the pace of change, writes Trish Carroll.

We all know change is a constant but often do not fully appreciate its speed or consequence until the wisdom of hindsight dawns. For the private legal profession the pace of change has ramped up so much that many lawyers have switched off and change-overload has kicked in. 

We only have control over how we respond to change. Knowing and doing are different animals and it is a tall order to develop a sound strategy for the medium-term - say, the year 2020 - if your head is buried in the next six-minute unit.  But successful organisations of all sizes carve out the time to see beyond the next six months or six years and plan ahead.

When I joined Minter Simpson (now Minter Ellison) in 1985 it was a 120-person firm with a vision to be a market-leading national law firm, and wanted to be recognised as such by the year 2000. It seemed an audacious ambition and 2000 seemed so far away. Minters worked relentlessly towards its goal and when the new century dawned it had achieved it. The legal world in 1985 seems Dickensian compared to the legal world of today and I suspect the same will be true in 2020.

If you do not want to be left behind, then start taking the time to think through the implications of just a few trends that are going to shape legal life in 2020.

Social media
It will not just be sophisticated clients who know they hold the power. Clients will constantly evaluate and compare performance, and social media and technology will make this process far more public than it is now.

Review websites for lawyers will be commonplace, and these sites will allow people to rank lawyers. Health insurance provider NIB is trailblazing this concept with www.whitecoat.com.au, a site where members will rank the services provided by about 200,000 allied health professionals. If it works for NIB, then expect the concept to be used for other professionals. Even if it does not work well for NIB, it is just a matter of time before it becomes the norm. This type of consumer ranking has the potential to let even the most unsophisticated legal shopper make more informed choices; think of the impact of accommodation sites such as Trip Advisor and the influence they have on your hotel choices and apply that logic to lawyers.

Generational workforce
Most Baby Boomers (born between 1946 and 1964) will have retired by 2020 and Generation Y (born between 1982 and 2000) will constitute 42 per cent of the workforce.  Generation X (born between 1965 and 1981) will be in control.

The values and expectations of Generation X and Y will finally prevail. Generation X and Y value equity and fair play, civic responsibility (a desire to give back), doing what is best for everyone and they support innovation and creativity. 

Generation X and Y also expect to have challenging and fulfilling work, competitive pay and to use up-to-date technology that synchronises with their personal gadgets. They expect to have access to the information and services they need to work from any place, at any time. They value difference and embrace diversity. They have high expectations of firm leadership and expect frequent, timely and constructive feedback.

In 2020, it is predicted the average job tenure will be three years, down from four today. One in four of us will be born overseas. Baby Boomers have not replaced themselves, so skills shortages in the local legal profession will be high. Seven in 10 law graduates will be female and law will continue its current trajectory towards being a generalist degree, much as arts degrees were in the 1970s.  

Social analyst Mark McCrindle predicts that when many Baby Boomers hit their mid-70s in 2020 we will see the biggest intergenerational wealth transfer in history because Boomers form 25 per cent of Australia's population and own 55 per cent of the nation's private wealth. All these factors will make previous wars for talent seem like scuffles. 

Technology
The current business model will be disrupted by new technologies, changing demographics and the globalisation of clients and law firms - just look at what is happening in Australia since global firms entered this market (and, as we go to print, nine of the top-10 global law firms, based on revenue, operate in Australia).

Professor Richard Susskind, a United Kingdom law professor, technology guru and futurist, challenges lawyers to ask themselves if the legal tasks you perform today can be delegated downward, outsourced, off-shored or handled by computer software. If your work is premised on personal contact and human relationships, you are not likely to be replaced by pure technology, but a lot of what you do inefficiently today will be eliminated by being outsourced or off-shored (see low-cost rivals).

Low-cost rivals
Getting more for less without compromising quality or security has seen the rise of legal process outsourcing (LPO) groups such as Pangea3 and CPA Global. Are you wondering what LPOs actually do? Well, here is a short list: contract reviews and analysis, due diligence, IP management, litigation support, regulatory responses, legal research, template-based drafting and much more and at a fraction of the cost of what large and mid-sized firms charge and with greater efficiency and quality assurance processes than many smaller firms.

CPA Global is retained by Rio Tinto so that the in-house legal team can generate 20 per cent savings by being focused on higher-value work. The arrangement is said to have delivered cost savings of US$14 million in the first six months. This is not an isolated example.

Pangea3, established in 2004, has 700 qualified lawyers working in Mumbai. These lawyers are trained in the UK or the US, speak perfect English and have worked in impressive firms before returning to India. Working for an LPO is a prestigious job.  Pangea3 is set to grow to 3000 lawyers by 2014. It was taken over by Thomson Reuters in November 2010 with revenues rumoured to be in the order of US$1 billion or, put another way, slightly less than half of the 2010 revenue of Baker & McKenzie, one of the world's largest law firms and which has been in operation since 1949.

LPOs may well be a solution to many unfolding problems such as legal skills shortages in Australia, eliminating a level of work Generation X and Y find unfulfilling and delivering better value for money to clients driven by the imperative of doing more for less with their legal budgets. 

All these changes are unstoppable, and even lawyers numbed by the current pace of change need to prick themselves into action and develop a plan for the future or risk becoming road-kill as rival firms take the fast lane to the future.

 

Trish Carroll is a principal of Galt Advisory, an advisory firm focused on helping firms and individuals devise and implement practical and successful marketing and business development strategies.  Visit www.galtadvisory.com.au for more information or find her on LinkedIn.