Competitive pressures – a temporary lull?
The pandemic has put a temporary brake on competitive pressures within the legal industry. The insecurity created by the crisis has led to clients remaining loyal and stopped people moving. Instead, firms have been focused on survival and adapting to new ways of working.
Can this last? It seems unlikely.
As firms become more confident the search for growth is returning and while it is still the larger firms feeling the heat, there is a discernible increase in competition from niche firms. Over a third of respondents selected niche outfits as a potential threat.
This suggests that competitive pressures are likely to re-emerge just as strongly as life returns to normal. However, looking more closely, it appears that competition for talent may be more of a threat than competition for clients.
US law firms show no sign of easing the pressure in the London market, for example, with many offering eye-watering sign on and retention bonuses to attract and retain good lawyers. Last year, 23 US firms posted London office revenue increase in excess of 10%, so they still have money to spend.
The US firms that are the source of so much of the additional competition in the talent market continue to dominate the top spots in ‘most chargeable hours expected’ tables. Lawyers are used to a high pressure environment and many enjoy it, but the pandemic has prompted even the most ambitious lawyers to reappraise their work life balance.
It may be that law firms will have to reassess the way they work. There is an opportunity for law firms that can offer better working conditions, including some agile working. It may be that they don’t have to keep throwing money at the problem of increased talent competition, but can approach it more thoughtfully. This may be particularly true for lawyers that want to combine work and a life that might otherwise have moved in-house for better hours.
The lull in competitive pressures in the market that have been seen through the pandemic are unlikely to last as the world returns to normal. However, the pandemic has offered a new tool for law firms to meet that challenge and retain their talent. It may not be high salaries alone that draw in the next generation of top lawyers. Law firms that can allow staff and partners a better balance may find it easier to fend off competitive talent threats.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.