Almost all independent and mid-sized firms say they are bracing for hard times according to a report commissioned by LexisNexis.
The software company’s 2016 Bellwether report states that 57% of the firms they spoke to strongly agree that “there are still rough times ahead for law firms” whilst 38% slightly agree. Just 1% disagreed, with the remaining 4% of no opinion.
However the report stated that many firms are perhaps more optimistic than they let on, with 58% saying they are planning for growth which while lower than last year’s 67% is still a majority. 21% say they believe they will be stable with 8% planning to merge.
The report also shows there is a huge gap between customer expectations and opinions of value compared with the law firm’s. Whilst 76% of law firms stated they believed they provided very good or excellent value for money, just 27% of customers agreed.
The report states: “This difference may stem from the fact that the two parties are using different benchmarks to judge value. Lawyers are often comparing their current fees to the fees they charged in earlier, easier times. Clients, on the other hand, are looking at the bigger value shifts that are happening across society as a whole, and expect to see the same kinds of changes in their legal dealings. For example, in their everyday lives, they are getting Waitrose-standard food from Aldi and Lidl, by cutting out the frills they value less.
“They are eating at quality restaurants, on fixed price menus. The list goes on and on, but in each case the client is either trading off on their own terms, or not trading off at all. By contrast, the legal profession has always been seen as expensive. And even though lawyers clearly have a specialised skill set, they aren’t seen as being any more qualified than other professionals: Lawyers should not be looking back, but rather seeking expertise, learning and inspiration from other service industries. The market will never revert to the glory days, “and ‘working a lot harder for less money’ isn’t the exclusive domain of lawyers – it is a fact of life in today’s value society.
“As one lawyer honestly admitted: ‘There is a little bit of resentment on my part. I started when guys could sit behind a desk and work would come to them. They made money hand over fist, so now surely it is my turn. But I am flogging myself to death.”
When asked to rank what clients value the most when dealign with legal professionals, Lawyers put “Provides clear indication of costs/fixed fee” top, whilst it only made the fifth-most important item for customers, behind “clear understanding of my needs”, “efficient”, “Keeps to timetable/avoids dragging on” and “Keeps me informed all the way”.
University College London’s Honorary professor of Law, Stephen Mayson said: “The report provides evidence of ‘the grand delusion’ – essentially, a culture that is out of tune with the market and a broken business model. Tinkering around the edges of the cost base and blaming others for the rest, rather than tackling some possibly uncomfortable home truths, will not address it and secure a sound future. But there is hope.
“The report also shows the correlation between growing, successful firms and other identifiable factors. The foundations lie in firms actually doing something about the fundamentals of their business through entrepreneurialism, thinking outside the legal box, focusing on client value and their experience of service delivery, specialisation, re-staffing, and the appropriate use of technology.”