Law Firm Business Leaders Report: Talent Wars Are Threatening Law Firm Profitability
Law firm business leaders are optimistic about their outlook but are increasingly concerned about rising competition for talent including how to acquire, retain, and pay staff. These are among the key takeaways of the 2021 Law Firm Business Leaders Report, released today by Thomson Reuters.
Legal Current breaks down the report findings on what’s keeping law firm leaders up at night, where they see opportunities for growth, and how they’re creating competitive advantages.
Risks to profitability
The top three high-risk factors cited by respondents involve talent:
- Lawyer recruitment and retention (51%)
- Poaching of staff by competitors (31%)
- Associate salary increases (29%)
- Under-performing lawyers (27%)
- Competition between law firms over fees (26%)
By comparison, a year ago, underperforming lawyers and general economic pressures were cited as the highest risks; talent concerns didn’t make the top five.
Practice area growth
Law firm business leaders see potentially high growth across a range of firm performance metrics – including demand, billed rates, and revenues per lawyer – and their optimism is largely driven by expected growth across most major practice areas.
- Family law is expected to grow because of pent-up demand from the pandemic.
- Bankruptcy growth is anticipated as businesses continue to close their doors and pandemic-relief measures from the government end.
- Real estate law, tax, and estate planning are other practice areas with positive outlooks.
Technology investment and adoption
In response to competitive pressures, firms are increasingly turning to technology to create competitive advantages. Last year’s respondents prioritized using technology as a strategy to reduce costs, but the focus in 2021 is implementing technology for objectives other than cutting costs.
- Two-thirds of firm business leaders (66%) said they definitely plan to use technology for objectives beyond cost-cutting.
- An overwhelming 92% said they either definitely or probably will adopt a similar strategy.
- Top areas for adopting and investing in technology include matter management analytics, client relationship management, legal project management, competitive intelligence/market analytics, and price modeling/matter budgeting/cost tracking.
Download the full report here.