Law Firm Responses to the COVID-19 Crisis: Current Actions & Future Challenges

Over the past few weeks, the legal industry, like the rest of the economy, has struggled with how to respond to the COVID-19 pandemic. Essentially all law firms have shifted to virtual operations as shelter-in-place orders and other government regulations around the world have all but closed down normal operations.

For the most part, the initial responses of law firms appear to have been measured and fairly reasonable:

• • • All firm have moved quickly to protect cash flow by suspending or reducing equity partner draws, by temporarily reducing lawyer and staff compensation, by furloughing staff whose jobs cannot be performed remotely, by reducing discretionary expenses, and by putting various projects and initiatives on hold;
    • Most firms have also shortened or cancelled their summer associate programs or are redesigning them to be as “remote” as possible, usually with promises to keep the summer associates who are affected financially whole; and
    • Most actions, at least thus far, have been implemented in ways that appear to protect firm staff and employees as much as possible. For example, while some firms have terminated small numbers of employees (including lawyers), the layoffs have mostly been in the nature of furloughs that preserve health insurance and other benefits. Likewise, compensation reductions that have been imposed have generally been labeled as “temporary” with every expectation of being restored once the crisis is passed. And the same is true for reduced contributions to 401(k) plans or other benefits.

What these actions indicate is that most firms have decided that the financial burden of the current crisis should be borne primarily by their equity partners. This conclusion strikes me as completely reasonable given the circumstances of the present challenge. During 2019, most Am Law 100 and 200 firms experienced strong financial performance with average revenue increasing about 5.5% overall with profits up as well, in some cases quite significantly. As a result, most firms entered 2020 reasonably strong financially, with more capacity to absorb an economic hit — at least one of limited duration.

It’s also important to remember that the present economic crisis is quite different from that of 2008, where the crisis was caused by structural issues in the economy itself. In the present case, the crisis has resulted from external factors imposed on an underlying economy that remains reasonably strong. Hence, assuming that business operations can return to some semblance of normalcy within the next few months, it seems reasonable to expect that economic recovery could occur much more quickly than after the collapse in late 2007 and 2008. It also seems likely that — as in the past — the legal industry would be one of the “leading” sectors in such recovery.

Of course, no one can predict with certainty what the path of the current pandemic will be, and there is always the chance that a second wave of the virus could spread in the fall. But, for now, most firms appear to be taking an approach that assumes (or at least, hopes for) a relatively quick resolution while keeping in reserve further actions that could be taken if necessary.

All of this seems quite prudent. But, against that background, what are the things that should be top of mind for law firm leaders today? I would suggest at least four, such as:

1. Foster Personal Relationships

In this period of continuing uncertainty and imposed isolation, it is critical to remember that personal relationships are important. In these circumstances, it is almost impossible for leaders to communicate too much. Everyone in the law firm from the partners to all the other lawyers, professionals, and staff need to know that their leaders understand the situation and are making rational decisions to manage it in a reasonable way. That process and resulting decisions need to be communicated over and over again — not just through firmwide memos or emails but in direct personal conversations. All law firm leaders, including senior management, practice and team leaders, administrative department heads, and others, should be directly involved in this process.

Equally important, law firms should remain in close personal contact with all of their key clients. Senior management should ensure that appropriate partners and others are in regular touch with their client counterparts throughout the crisis period.

2. Examine Our Pandemic Response

It is not too early for law firm leaders to begin asking what we have learned from the coronavirus experience. Consistent with standard risk management procedures, working groups should be convened even now to consider how firms responded to the crisis. Some useful questions should include: What surprised us? What were we not prepared for? What worked well and what didn’t? What have we learned about how to better prepare for future events? What changes do we need to make in our structures or processes to be better prepared?

It is worth remembering that this is not a purely academic exercise. As previously mentioned, there is every likelihood that the current pandemic could heat up again in the fall or winter. So, it is a discussion that should be taking place now.

3. Establish Contingency Plans

Considering that the path of the pandemic cannot be predicted with any certainty, it’s also important for law firm leaders to have carefully thought out contingency plans that can be implemented relatively quickly depending on the turn of events.

Firms should know what they will need to do if closure orders persist longer than expected, or if revenues drop off more sharply than predicted, or if a wave of infections directly impacts the organization, etc. Ideally, such plans should provide for a series of escalating actions that could be undertaken depending on the severity of the unfolding circumstances.

4. Think about How Work Will Change

Even as we struggle to manage through the current pandemic, it’s important to begin to think about how the legal industry’s experience in this crisis may impact and change our work in permanent ways, even in a post-coronavirus world. Although it is no doubt too early to suggest definitive answers to this question, there are clearly some themes that are emerging, including:

• • • The present crisis has demonstrated the feasibility of delivering legal services in a far more virtual way than we have seen before. Law firms have talked for a long time about encouraging work-at-home arrangements to achieve better work-life balance and to accommodate the family needs of lawyers and other employees. The past several weeks have shown that such arrangements can work, perhaps better than many firms imagined.
    • Similarly, the pandemic has pressed us to explore the full potential of on-line meetings, demonstrating the surprising functionality of this tool and perhaps paving the way for less meeting-related travel in the future. Particularly interesting has been the use of on-line sessions for various courts and tribunals around the country.
    • Clearly the current crisis has demonstrated the growing importance of improved technology in the delivery of legal services, and the role that technology will no doubt play in improving both the efficiency and cost effectiveness of legal service delivery in the future. Firms should reconsider their own technology needs and capabilities in light of these new realities.
    • And, not surprisingly, the experience in the present pandemic will likely encourage clients to insist on further efficiencies and further reductions in costs for legal services in the post-coronavirus world.

It is not too early to begin considering how these themes may impact law firm strategies moving forward.

In short, law firms have thus far done a credible job in responding to the COVID-19 crisis in measured and reasonable ways. But challenges remain, especially as the pandemic continues forward. Indeed, the job of law firm leaders in successfully guiding their firms in this uncertain period has really just begun.