What lessons can small law firm leaders glean from the "Small Law Firm Business Leaders Report" and the perspectives of business leaders of smaller law firms?
We’ve covered many important topics in this series on securing your practice’s future, ranging from how to develop and execute a strategic plan, to managing client relationships, and many posts on the importance of improving business development. All those pieces have something in common — they’re all written from a lawyer’s perspective.
As a former practicing attorney, I recognize the unique aspects of an attorney’s mindset. Our education, training, work experience, and in many respects, our personalities, give attorneys a certain outlook on questions that are often risk-averse, carefully calculated, and desiring of evidence. The classic axiom of “never ask a question to which you don’t already know the answer” finds it source in this way of thinking and in this approach to problems.
While I value my own experience, I also appreciate the perspectives of those who have different experiences and training and can provide invaluable insight as I look to solve problems. I had this in mind as I was recently reviewing a study on the business practices of small law firms.
In late-2020, the Thomson Reuters Institute released its second annual Small Law Firm Business Leaders Report. The report focused on the perspectives of the business leaders of small law firms, rather than the attorneys who lead the firms. Survey respondents were firm executive directors, chief financial officers, chief operating officers, and finance directors who did not have responsibility for client matters. While some of them may, in fact, be attorneys, they still offer a unique voice because their purpose is to focus on the successful functioning and operations of the firm.
At first blush, the reaction of a small law firms might be that such roles do not exist within their businesses, so these kinds of insights are not truly relevant. And as a threshold matter that seems true, yet the reality is that there are real insights and learnings to glean from their perspective. For context, 58% of law firms in the study had annual revenues of less than $10 million per year, and 79% described themselves as having a local focus, as opposed to a regional or national one. So, while attorney headcounts might vary somewhat compared to relatively smaller-sized law firms, the overall focus and business emphasis of these larger practices are genuinely not that much different.
So, what were some of the key takeaways from this study?
- Not surprisingly, economic concerns top the list of identified threats these firm business leaders identified to their profitability, but they are rightfully sharply focused on how their own staff members and attorneys perform.
- Overall, firm business leaders are optimistic on their future outlooks, but are quite conservative in terms of future expenditures.
- Controlling costs is a key concern for small law firms, yet they are hesitant to consider outsourcing many functions, with the exception of e-discovery and IT support services.
- While many small law firms say they are looking for technology solutions and were planning to use or upgrade certain tech tools — such as matter management analytics, E-billing, document automation, and collaboration tools — other firms are still slow to adopt such solutions, leaving them at risk of falling behind. I have written about this extensively, most recently in a discussion of the opportunities 2021 can hold for small law firms.
- Law firm business leaders say they feel empowered to drive change, but the majority also feel at least some degree of resistance from the partners at their firm toward changing their firm’s legal service delivery model.
I offer up a fresh look at this report as an example of the kinds of insights that can be gained by examining the practices of other similarly situated and focused law firms. Lawyers excel at finding precedent and turning it to their advantage as they structure an argument or deal. Best practices on the business side are no exception.
Several of these points are worth further exploration and will be the focus of future articles; for example, I will offer a deeper evaluation of law firm expenditures and technology strategies over the next couple of months. For now, I hope the Small Law Firm Business Leaders Report offers you some interesting food for thought.
