Wednesday, December 23, 2009

Temerity in the Face of Turbulence

In a recent newsletter Andrew Hedley, founder of the UK legal strategy consultancy Hedley Consulting, discusses changes set to impact the legal market in the UK (US legal firms are also facing similar pressures). One of the core changes, emanating from the cost pressure on law firms, will be in the law firm structure with the most apposite change being the “significant acceleration in the use of legal process outsourcing for increasingly complex work.”

Hedley’ piece is posted in full below.

"The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic."
-Peter Drucker

The legal sector faces a number of unprecedented challenges in the year ahead. The one with potential to disrupt most widely and deeply is a wholesale move to fixed-fee pricing. Surveys of in-house counsel show that they are resolute in demanding fundamental change over the next twelve months.

Delivering profit from fixed-fee work requires wholesale changes to historic operating models and has far reaching implications.

One inevitable consequence will be the demise of associate lockstep, the process by which salary (and hourly rate) increases are pegged to years of qualification rather than any objective measure of increased ability to add value for the client. Another will be a significant acceleration in the use of legal process outsourcing for increasingly complex work.

An emphasis on better management skills will also be necessary as firms disaggregate the legal process, undertake individual work components at the lowest price point and then reassemble the “legal product” at its point of delivery to the client.

The effect on firm culture, talent management and the psychological contract between partner and associate will be hugely significant. However, these are nettles which must be grasped to emerge from the recession with businesses that are viable in the longer term.

Simply hoping that one can hold out long enough for better times to return is not a strategy. Temerity in the face of turbulence is unlikely to deliver the desired result!