Law firms warned ‘sharpen up’
Recession is accelerating change in the legal sector by ten years. The sector has been described as ‘inefficient’ now puts value and efficiency first, driving hourly rate billing gives way to value billing, where clients hold power in legal supply relationships.
A new report warns law firms that that they need to modernise or lose out as a major power shift is taking place in favour of the in-house client. The report, which canvassed the opinions of 130 General Counsel and 80 law firm partners around the world, reveals that 78 percent believe that the recession will have a lasting impact on the profession, and that value and efficiency are now the non-negotiable attributes a client looks for in a legal partner.
The report – ‘Law firm of the 21st century – The clients’ revolution’ – commissioned by international law firm Eversheds, also reveals that the recession has had a major impact on how ‘magic circle’ law firms are viewed, with just over half (51 percent) of clients and 46 percent of partners citing the term as defunct. When asked if this revision, to the traditional law firm hierarchy would be a welcome development for the market, an overwhelming 94 percent of clients and 81 percent of partners agreed.
While the recession has proved to be a key catalyst for this change, the report also highlights several other factors that have contributed. The primary factor identified by over a third (37 percent) of all respondents was globalisation, particularly the move to the East, with many international law firm leaders, as with other business sectors, considering moving their headquarters from the West to the East.
An additional driver for change is the increasing status and professionalism of the in-house lawyer (35 percent). Three-quarters (74 percent) of General Counsel said they now occupied a far more senior commercial advisory role in their companies compared to before the recession, with 55 percent assuming more responsibility for corporate governance. Technology has also been a factor for change – over half of clients (58 percent) had used technology to deliver legal services more efficiently. The Legal Services Act, for UK lawyers, was seen as having the least impact, with only eight percent believing it would have a transformative impact.
Commenting on the findings, Bryan Hughes, chief executive at Eversheds, said:
“When we conducted our first report into the legal sector – ‘The 21st Century Law Firm’ – two years ago, we found that many law firm partners were resistant to change, despite their clients asking for it. For example, two years ago, only 22 percent of clients and 48 percent of partners saw value billing as a trend for the future. Now, 86 percent of clients and 88 percent of partners say they often or sometimes use value billing.