Juggling deadlines. Rushing to meetings. Running ever faster on the proverbial hamster wheel. Sounds familiar? The machinations of leading a law firm are such that we are all always in haste. That is how we operate. And this is how our firm’s function. But to what end?

Welcome to our Fourth Firm Leader’s Research Survey results. With our previous survey efforts we have reached out to over 200 firm leaders asking as many as 30 different questions (“Examining The Inner Workings of Law Firm Leadership”); but in our efforts to be respectful of their time, endeavored to proffer questions with a series of quick check-off-the box responses. With this survey we decided to be more adventurous. This time there were 10 questions but with the majority being open-ended, requiring our respondents to notate and share their candid views – on looking ahead; identifying their top priorities; predicting potential upcoming surprises; and even forecasting risks they felt few firm leaders may see coming.

You may remember that last December we presented these same 200 Firm Leaders with a selection of timely and potential Issues (“The 2024 Burning Issues Confronting Firm Leaders”) to elicit their personal views on what were the most critical concerns occupying their agendas going into 2024. We wanted to revisit some of the themes we heard at that time, to get a sense of future challenges for the remainder of 2024 but beyond that and consistent with matters expressed in our Strategic Planning White Paper (#2) endeavored to have them think Strategically and Externally.

One of our objectives with this survey undertaking arose from our comparing notes with respect to what often goes on in law firm Leadership and Executive Committee meetings we have each attended and from the results obtained with our Strategic Planning Survey (“Dissecting The Processes of Law Firm Strategic Planning”) – too much time and attention spent focused on internal and operational minutiae. In fact, in one particular law firm full-day Board meeting, we had the opportunity to field test the following model as a means of helping everyone stay focused on their most important priorities.

As this was an in-person meeting, on a Flip-Chart we posed the following graphic:

“Is this particular agenda item / topic / discussion that we are about to / currently spending time engaged in:”

operational or Strategic

yesterday or Tomorrow

internal or External

reactive or Proactive

We soon realized that this unintentional STEP Model that we created helped everyone stay focused on where they could realize their greatest ROI on the time they were spending to look outward, think strategically, and endeavor to use their time effectively in these executive meetings. From that experience we explored how it might also serve as a prompt to help us craft survey questions for our Firm Leaders for this particular undertaking. Further, we hope that you reflect on this model as you read through these responses to our questions and try it out within your own firm for selective meetings

Now, while our responding firms varied in size from about 100 attorneys to well over 1000, when we broke out the responses received and looked for the most common themes, with few exceptions that we have identified in the following report, firm leaders were looking forward in very similar ways. That all said, what follows is a summary of what we identified from our survey results for each of the question we posed with excerpted commentary offered by our many responding Firm Leaders (and with an obvious sensitivity to maintaining confidentialities).

SURVEY RESULTS

I. LOOKING FORWARD TO THE END OF THE YEAR

• “What is your TOP priority for the rest of 2024?”

From firms of all sizes the highest priorities were the same.

The perhaps obvious and single most important was finishing the year in a strong financial position. We heard, “Finishing strong, which requires collection of dollars and continued intake of matters to feed our end of year and beginning of next year.” “Getting paid for the work we have done and continuing to hire the talent we need to serve our clients.” And from a couple of firms: “Increase rates and position pricing for 2025.”

The SECOND priority encompassed a number of related Talent Issues – from “Immediately accretive lateral growth in our core practice areas” and “retaining our top talent” to “recruiting talent to integrating laterals and succession planning.” We were told by 38% of these firms about the importance of lateral recruiting; integrating lateral partners; completion of a merger integration and the challenges of maintaining firm culture. We even heard from one firm how they needed to “keep their younger lawyers who want offices happy while we try to find more space.”

The THIRD highest priority was exploring growth opportunities for 2025; including “Capturing our fair share or more of transactional work as the economic climate improves.” We were informed about the “continued focus on execution of our strategic plan which includes development of more profitable business opportunities;” “determining areas (niches) in which to allocate resources;” “unlocking potential of key clients;” and “maintaining and improving client relationships in expanding sectors.”

A number of firm leaders representing the larger firms also reported on their need for “continuing to talk with clients to understand the changing landscape relating to technology, elections and world affairs;” and taking action to “unlock the vast potential available through their key clients.”

• “Thinking about Talent Issues what are you most CONCERNED about?”

From firms of all sizes there was an overwhelming sense (87%) that the ‘War for

Talent” is NOT over, with the majority of those Leaders of firms of over 500

attorneys declaring that they “had changed our lateral partner recruiting strategy

over the last 2 years to improve results.”

Now that said, we were taken back to learn that ONLY 12% of our Firm Leaders

responded that they believed ‘We are winning the war on talent’ with another 10%

feeling that “Partner satisfaction with their firms will increase over the next year.”

The one area where we found the largest difference in firm responses was in “we

are rolling out new training and related initiatives to help upskill partners. Some 49% of those firms of over 500 attorneys claimed that that was what they were doing, while ONLY 23% those in the less Than 500 attorney category were following suit.

These responses then had us intrigued to explore:

• “What do you think are the THREE most important stumbling blocks in developing talent?”

Perhaps not surprising when we think about the pressure that firms place on partner productivity these days, an overwhelming 67% of respondents answered that their “attorneys are too busy with billing time.”

A secondary stumbling block identified was some combination of “inertia” and “my partner seem to be content to remain where they are from a talent perspective.”

Finally, this was followed by many Firm Leaders responding that there was “a sense of general resistance” with “attorneys thinking they have all the talent that they need.”

Now an interesting vector going in the opposite direction was the lack of any concern for the notion of developing talent being too expensive; lacking a definitive return on investment; absent the availability of high quality training within the marketplace, or the firm feeling that they possessed insufficient internal training resources. It all seemed to boil down to an obsession with productivity, billing and maintaining the status quo.

One of our Firm Leaders was quite vocal in suggesting: “Depends on what sort of development. If it is business development and getting junior professionals to understand that becoming a partner is more than just being an Uber associate – business development training is key. If it is more about developing substantive legal skills, that’s actually not as challenging. A lot of it is teaching EQ which can be challenging. “

Yet another was quite adamant that it was simply a matter of: “Laziness - and the truth is no one is too busy and while hard to quantify with precision, over time there is a return. Also, when we do our training it is a giant morale booster firm wide.”

II. LOOKING BEYOND 2024

• “What will be the biggest SURPRISE we may see next year – 2025?”

Once again, firms of all sizes told us that more lateral movement and mergers, as well as the expanded implementation of Artificial Intelligence would be the biggest surprises – and we would wager that few of you reading this are at all surprised! Now that said, these two responses were most pronounced at firms of over 500 attorneys and classified by many of these same Firm Leaders as potentially “disruptive.”

For example, when we heard about INCREASED CONSOLIDATIONS we were told that Firm leaders expected to see “more lateral movement by partners”; “even more acceleration in large team moves”; “more separation of the Top 25 from the next firms”; “increased consolidation of AmLaw 200 firms” and “another US-UK mega-merger.” Those perhaps more skeptical reported that the surprise would result from “many of these big ticket mergers are NOT going to work out” and “this surge of law firm mergers/combinations will result in more law firm failures.”

With respect to ARTIFICIAL INTELLIGENCE we were informed that “there would be even more rapid use of new technology than we think;” However, most of the comments received were from those negatively forecasting AI disruption, with numerous examples like; “we will see a failure of several elite law firms to embrace AI and related technology;” “there would be a strong sense of disillusionment and rejection of AI in the legal profession;” “AI will take longer than anticipated to have material impacts on the legal industry;” that “the expanded implementation of AI in corporate legal departments would resulting in reduced demand for commoditized law firm work;” and that “there would be increasing caution about / skepticism towards the risk / reward and cost / benefit calculus relative to AI.”

Beyond technology and consolidation there were intriguing GROWTH observations like the following: “I would predict a Middle market M&A uptick;” while another talked about changes to capital markets and deal flow;” and we heard how there would be a “Litigation boom, particularly in employment, class action and business litigation work that may not be much of a surprise.”

There were some real mixed feeling about THE ECONOMY with the most negative being from firms of less than 500 attorneys. Some of these concerns included “I am concerned about a potential recession and resulting impact on our transactional practices” and “a downturn in the economy will provide leverage for management to maintain talent and hire laterally.” The more optimistic from all firms are calling for a “A 4%+ GDP growth, which helps everyone;” “I expect to see an uptick in the general business cycle next year, but if this happens, I believe it will come as a surprise to most;” and “expect a better performing economy than is currently being forecast.”

A number of firm leaders reflected upon things like: “The impact of the election -- who knows!” “Global instability;” “The domino effect of geopolitical risk and de-globalization on global firms.” And finally one of our leaders cited the biggest surprise would be the “first certification of associates as a recognized bargaining unit by NLRB.”

• “What is the biggest RISK in the legal market FEW law firm leaders see coming?”

This next question concerning unidentified risks, and perhaps it was the result of sequencing, because many of the responses we elicited, mimicked similar things we heard regarding biggest surprises.

Again, expanded implementation of Artificial Intelligence was cited as the biggest risk and seen by ALL firms of over 500 lawyers who identified this risk, as being highly disruptive with responses like “the threat of AI to the development and retention of junior associates;” “GenAI products - all know it is there, but many firms I know are taking a ‘wait and see’ attitude. It will make inroads into the lower associate workload faster than most believe;” “second-order and third-order consequences of faster-than-expected advances in AI (e.g., true disruption of industries and society);” and “clients pushing back on being charged for work that can be performed by AI.”

Following the technology risk there was a wide variety of possibilities identified, including:

- “The growing challenge on the Am Law 100-200 firms to continue to compete with the growing advantages established by the Am Law 50 firms.”

- “Impact of expanding in-house legal departments at expense of commercial contract and disputes lawyers.”

- “Continued consolidation of strong lawyers and profitable practices to the most profitable firms.”

- “Client demand decreasing because of multiple factors (increased internal hiring, early matter resolution, more aggressive rate pushback, etc.)”

- “Younger lawyers want to be in the office. The work from home dynamic is dying;” and “a generation of young lawyers who fail to understand that clients' needs are more important than their needs;” and “skill deficits in associates;” and “fewer law school grads.”

- “In less than ten years many of the New York based traditional law firms (ie, the Sherman’s of the world and maybe even the Skadden) will be dead or gobbled up.”

- “Burnout / dissatisfaction among firms' most productive attorneys”

- “Partners leaving because not sufficiently connected to firm”; and “Failure to recognize the existential importance of firm culture.”

- “The uptick in large merger / combination of firms must, at some point, lead to a law industry reckoning on client conflicts. No way these large combinations are happening without firms conveniently skirting the conflict rules.”

- “Incursion of Big 4 Accounting firms into legal markets.”

- “High margin clients insisting on scale and scope;” and “At some point there has to be push back on sky-rocketing rates.”

• “Name one thing that you wish you could spend MORE time doing?”

In a day and age where professionals supposedly complain about the amount of time they spend in MEETINGS, our Firm Leaders, from firms of all sizes, overwhelmingly told us that meeting with their partners and staff (was number one) – and meeting with their clients (was number two) followed by time spent engaged in strategic thinking.

“Visiting and talking with partners colleagues across the country;” “talking with our partners individually about the challenges and opportunities they see in their practices;” spending quality time with talented partners and laterals;” meeting individually with our attorneys;” “encouraging the great performers;” “spending more time with the lawyers in all of our offices;” “motivating or separating underperforming attorneys.”

With respect to clients we often heard it stated this simply – “MORE time talking with clients!”

From “visiting with clients in person;” “developing new relationships among emerging clientele” and “business development - connecting with major clients.”

With respect to STRATEGIC THINKING there were all kinds of responses: “contemplating the future;” “strategically directing the firm;” “stepping away from operational issues to focus more on executing firm strategy;” “talking to my partners daily about our strategic plan;” and “overseeing implementation of practice group strategic initiatives;”

And we also heard: “Almost everything - never enough time. If I had more time, I'd prioritize time building and sustaining relationships internally and externally; lateral recruiting and growth!”

That all said, there were a few that offered feedback like: “Actual legal work;” “Sleeping;” “Lateral recruiting and integration;” and “Talking with my peers on how we take better care of those we work for, as I think the mental health issues in the industry are severe and not getting ample time or attention.”

• “Name one thing that you wish you could spend LESS time doing?”

Perhaps to be expected, as it is one responsibility that Firm Leaders cannot delegate, over 58% of the responses received (touch higher at 64% for those leading firms of more than 500 lawyers) was dealing with those often ugly and certainly difficult, internal people conflicts.

The most common feedback we received was this: “internal politics;” “dealing with performance issues;” “dealing with difficult partners and interpersonal partner disputes; “ “navigating annoying partner issues;” “people conflict management and resolution;” “managing lawyers with respect to internal disputes, whether it be with respect to clients, staffing, etc”

These conflicts were then followed by having to deal with annoying administrative problems, like: “Working on collections and ensuring clients pay their bills on time;” “reminding our attorneys to comply with admin requirements like entering their time, getting their bills out in a timely fashion, etc.” “handling HR issues;” and “responding to partner requests for one-off exceptions to various firm policies and procedures;”

And at an even higher level – “Resolving conflicts affecting client matter intake;” “tending to a particularly complicated organizational structure;” “navigating local vs. global dynamics;” and “travel and time in airplanes!”

Then there were also the more mundane: “Interviewing lateral candidate, but it is a necessity;” “handling non-strategic day-to-day issues that arise;” and “dealing with nonsense that is not important in the big picture but is very important to the person raising the issue.”

Finally, one we were particularly struck by: “Explaining to a small number of people that law firm finances are not particularly complicated and if we focus on the key handful of big items and stop even looking at a handful of small, mostly inconsequential items we will all do better. But lawyers do not really understand finances that well and love to fixate on whatever they love to fixate on, even if it does not really matter very much.”

• “Looking out over the next Two Years (2025-2026), what are likely to be the Highest Priority Firm Leader CHALLENGES?”

The PRIORITY from firms of all sizes was just naturally responded that they wanted to “continue achieving growth and profitability” and then there was a huge difference between the largest firms – 83% reporting that they were concerned with “Keeping the partners we don’t want to lose” versus of 19% of firms under 500 lawyers identifying that as a concern.

Following that difference, firms of all sizes converged on the importance of “Getting more high value work while keeping our best client work” as high priority, together with “Developing and maintaining expertise in growing practices.” Now this seemed to us to be at odds with our earlier queries regarding talent and being informed about how partner seem to be content to remain where they are from a talent perspective.”

Meanwhile, one of the other priorities which firms of all sizes ranked highly (over 72%) was maintaining our firm’s culture – which was not a priority we expect to hear.

What did NOT get much attention as an identified priority for firms of all sizes, scoring below half of the Leadership responses we received, included “Institutionalizing any urgency for improved business development;” “increasing client pushback on rate increases;” and “keeping non-equity partners happy.” (all potential Talent Development issues);

One other issue we heard about was succession planning as a priority from a fair number of respondents. Which tied in nicely to our last two questions . . .

• “Approximately what percentage of your law firm’s partners will have LEFT for another law firm in the past 12 months?”

From firms of all sizes we found that 64% lost less than 2%; followed by another 31% losing 3 to 5% of their partners. While NONE of the less than 500 lawyer firms confessed to have lost over 5%; about 9% of the larger firms admitted to having lost 5 to 10% of their partners. The remainder, 20% claimed not to have lost ANY partners or chose not to respond to this question.

• “Approximately what percentage of your law firm’s total revenue is controlled by partners who will probably LEAVE or RETIRE in the next 2 years?”

With this question we heard from 50% of Firm Leaders that they approximated 2% or less of their revenue being at risk with comments like “Very little. Our succession program has worked extremely well;” and “very small percentage.”

From the remainder we discerned that 38% were estimating that it could be over 5% with 19% of those thinking more in the range of over 10%.

Repeating from our 2024 Burning Issues White Paper on this topic:

Growth issues such as bringing in new clients and helping make the firm grow have pushed succession planning to the back of the list of leadership priorities, but most legal profession academics and observers regard it as the #1 endemic problem within the profession. And it’s going to get worse before it gets better.

It has been said that succession of baby boomers is an issue that many firms avoid addressing and firm leaders resist succession planning due to a fear of having to deal with the emotional components and having to engage in difficult conversations. For those who have engaged in proactive succession planning, it is one thing to set up a plan for some years down the road and forget about it with everyone caught up in the day-to-day busyness of business. It is another to proactively schedule periodic meetings to check in and ensure that the good intentions of the plan are being carried out properly. One firm leader told us that he has scheduled conversations with his partners at least once a year leading up to their retirement. It is a good way to ensure the plan is moving along or to spot areas that need remedial attention, long before they become an issue.

SOME CANDID ANALYSIS TO PROVOKE THOUGHT

III. COMMITING ATTENTION TO THE TALENT ISSUE

As a general rule, firm leadership needs to help partners understand that they are in competition will millions of other professionals all over the world, capable of doing the same work that they can do, and the sad news is that: “nobody owes you a career. To continue to be successful you must continually dedicate yourself to retraining your individual competitive advantage.”

In his 1982 book, Critical Path, futurist and inventor R. Buckminister Fuller estimated that up until 1900 human knowledge doubled approximately every century, but by 1945 it was doubling every 25 years, and by 1982 it was doubling every 12-13 months. Today, it is estimated that human knowledge is doubling . . . every 13 months! But that said, no one can yet determine what IA will impact the doubling of knowledge. We suspect that you would agree that this trend is incontrovertible. Data and knowledge are increasing at an ever-accelerating rate.

This accelerating growth of knowledge in not all we have to contend with. Compounding the challenge is how long that knowledge remains useful – or, how long does it take for your knowledge to become outdated, inaccurate or irrelevant. One measure of this is known as the “half-life” of knowledge, the amount of time it takes for our knowledge to lose half its value. For those in almost any profession from medical and engineering to law and consulting, the half-life of our knowledge is shrinking such that what may have been valuable to know a few years ago, may have very limited value today.

What this obviously means is that the systematic development of legal knowledge and skills, over time, depreciates in value – especially as your competitors acquire and offer similar or equivalent expertise. And with each passing year, in spite of the recent trends to raise legal rates, the fees that clients will willingly pay for expertise diminishes, such that even your most loyal clients will not value as highly, what any of us do for them the second or third time as they did the first.

We believe that going forward, the most successful firms will be those who rethink the concept of where they encourage and perhaps incentivize partners to invest some portion of their non-billable time. To succeed in today’s environment of rapid change requires continually building your knowledge base, your skills, and learning how to do entirely new things. If our attorneys don’t dedicate the time to building their skills, we end up solving yesterday’s (commoditized) client problems (usually at a hugely discounted fee) instead of tackling tomorrow’s burning issues, before someone else does.

In the long run, superior competitiveness derives from having an ability to build skills faster than competitors, and with the kind of knowledge and skills that germinate entirely new and lucrative practice niches. Knowledge and skills are the engine of new business development.

OUR PREVIOUS RESEARCH WHITE PAPERS:

Examining The Inner Workings Of Law Firm Leadership (2023)

https://www.legalbizworld.com/_files/ugd/b30d31_2a5937a03ba84743989d5ddefaa942cd.pdf

The 2024 ‘Burning Issues’ Confronting Firm Leaders (2024)

https://www.legalbizworld.com/_files/ugd/b30d31_da66d0e88ce84b3cbd35992c4827ce74.pdf

Dissecting The Processes of Law Firm Strategic Planning (2024)

https://www.legalbizworld.com/_files/ugd/b30d31_5ab74cae490641e3a4bf9bff76061e02.pdf

Michael B. Rynowecer, is President of The BTI Consulting Group, the leading provider of strategic research and client feedback to the legal community who, for more than 30 years, has conducted compelling research on key performance aspects of the legal industry.

Patrick J. McKenna, is an internationally recognized authority on law practice leadership and strategy, who has worked with the top leadership of premier firms around the globe to discuss, challenge, and escalate their thinking on how to manage and compete effectively.

Copyright PatrickMcKenna.com 2020. All Rights Reserved.
Patrick J. McKenna Ashridge House 11226 - 60 Street Edmonton, Canada T5W 3Y8 patrick@patrickmckenna.com	Site produced by Austin PR