Now in its sixth year, Pitcher Partners’ latest Legal Firm Survey, conducted last year, focused on the impact of COVID-19 on legal firms, their staff and businesses. The survey of law practices across Australia consisted of a questionnaire and a roundtable of participants to discuss the results.
There were some predictable and some not so predictable outcomes, which indicate what law firms should be focusing on in the year ahead.
A realignment of priorities in legal firms
In 2020 there was a realignment of priorities in legal firms, which is likely to continue throughout this year. Asked what the greatest challenges had been facing firms during the year;
61% mentioned staff wellbeing, followed by productivity (39%), financial stability (29%) , profitability (28%) and technology (19%).
As the economy continues to recover from the impacts of COVID-19 and law firms look at the future of work, staff wellbeing and productivity will continue to be top focuses. Balancing these areas with the financial stability of firms is another important issue. Many have shown they can be productive from home, but what is the price in terms of wellbeing and lost connection.
A focus on flexibility and connection will be key for employee wellbeing
Most legal firms surveyed (68%) noticed an impact on employee wellbeing in 2020, the majority noting a decline (52%), some no change (23%) and some (14%) a surprising increase.
This increase was noticed in firms of all sizes. But what may have first been a welcomed novelty at the start of COVID-19 – the ability to work from home, more time for exercise and being with loved ones – has taken its toll for many.
Key causes mentioned for a decline in employee wellbeing were isolation, stress, mental health and anxiety and the challenge of looking after children and home-schooling.
“Some have welcomed the change in terms of working from home. Some have found this difficult and prefer the office environment. So, a mix of wellbeing improvement and decline,” observed one partner.
With the subsequent health effects of various restrictions and lockdowns impacting employee wellbeing, leaders, managers and HR teams should continue to focus on checking how staff are travelling as firms move forward.
Employment looks to remain steady, albeit with some slight growth
Still looking at employees, while some firms had redundancies (36%), the majority kept staff (64%), and more than half did not change their employment arrangements.
Those that altered their employment arrangements changed the number of hours worked and/or remuneration in response to the economic impacts of COVID-19. However, where there were financial risks to be mitigated, there was also new business opportunities.
For many firms, 2020 was a year of opportunity, with 24% of legal firms surveyed developing new business lines. Perhaps in response to these new services lines, 31% of firms are looking to increase the employment of new staff, with the remainder set for recruitment to either stay the same (61%) or reduce (8%).
Managing productivity will be a key challenge moving forward
With productivity so closely related to employee wellbeing, there were again some surprises. Small firms saw the greatest drop in productivity (39%), while medium firms mostly (38%) remained unchanged, and many large firms (38%) saw productivity increases.
“Increasing productivity could be driven by staff and partners not taking leave and so continuing to work through”, observed one COO, “maybe the drop in productivity will be deferred until 2021 when people start to take normal amounts of leave”.
Monitoring productivity throughout 2021 will be important for legal firms as they measure what kind of impacts returning to the office, the preparedness to take leave and the potential to travel domestically will have on outputs.
Financial stability remains steady but should be closely monitored
More than half the responding firms (54%) reported no (29%) or positive change (25%) to their financial situation as a result of COVID-19.
Of the 46% who had been negatively affected, a decline in new work (58%) and a decline in revenue (48%) were the main issues with a surprisingly small number (18%) seeing an increase in bad debts. Consistent with the other varied results, 25% saw some positive financial impacts. These are important factors for law firms to monitor throughout 2021 as industries continue to return to business as usual. Now more than ever, cash flow forecasting and continually monitoring to mitigate downside risk is critical.
Thinking about the future of work
Most firms are either making working from home more permanent (48%) or have already offered it (17%). Only 16% say it will not be part of the future environment, while another 18% are unsure.
Almost half of the respondent firms (47%) said they were not considering scaling back their premises, with the remainder either scaling back (26%) or unsure (26%). Larger firms were considering scaling back (37%) more than smaller firms.
Moving forward, legal firms need to consider the challenges of flexible working. Key considerations will include who will be in the office and when, the OH&S issues of working at home, paying for property full time when people are only there part-time, and people feeling comfortable on public transport.
The focus on cybersecurity is becoming more prominent
The majority of respondents (75%) were concerned about threats to their firm’s and their client’s data due to COVID-19 working arrangements, with larger firms the most concerned (87%).
“We have seen an increase in cyber audits with clients wanting to make sure their information is protected”, observed one COO.
Being proactive when it comes to cybersecurity will be important for firms, especially in the coming years as work becomes more mobile. Firms should focus on proactively auditing their technology and systems to keep information secure.
What lockdown changes will stay in the legal sector?
Firms had a range of responses to the idea of taking some of the changes from lockdown and making these more permanent. While some firms will not make any changes and others are still unsure, most firms have plans in place and are looking to work with staff and clients to keep the flexible working conditions they have implemented.
Strategies being adopted include focusing on communication and improving supervision of younger lawyers and accountability across the firm. Many lawyers still learn by osmosis, and it was agreed there needed to be a more proactive way of teaching and supervising young staff.
Several respondents mentioned the challenge of getting older, more senior partners to understand and embrace new flexibility. Some of this flexibility will also be extended to clients where remote meetings are planned to continue and perhaps change clients’ views about meetings.
While some found virtual interactions slower and less effective, many hoped there would be a continued increase in the use of technology such as video conferencing for court, hearings or mediation, less reliance on paper, and electronic signing.
2021: A year of further, mostly welcomed, change in the legal sector
Perhaps some of the more surprising changes firms wanted to continue was a “focus on the fundamentals” of business: looking after clients and each other and striving for a better balance between work, the office and home. This is a welcome change for a profession where change can be slow-moving and difficult to implement.
What is clear from legal firms across Australia is that, despite the challenges of 2020, it has given firms ideas for new ways to approach working and highlighted the importance of employee wellbeing, which will remain key in 2021.