In our article ‘Corona Crisis– Effects of social and economic scenarios on the legal market’ we have outlined some possible developments and relevant observation points. This results in some areas of actions for law firms, which we outline below.
In our future contributions we will detail these in a structured way on the time axis of short- / medium- / long-term measures.
Actions for law firms:
- Reaction to macroeconomic changes
- Positioning & Strategy
- Law firm organization
We will briefly outline each of these in this article and will go into them in more detail in further articles to follow.
1.1 Macroeconomic changes
Two macroeconomic changes will affect clients and thus law firms:
- the future shape of global trade; and
- the State (post-Corona) as an economic actor through its simultaneous action as creditor and co-owner
We anticipate a strong demand for advice in the areas of regulatory, compliance, finance, corporate and litigation as well as in trade law.
Clients’ debt levels, particularly in those industries more severely affected by supply and demand shocks, will increase sharply and the pressure to restructure will increase accordingly.
For law firms, this requires:
- To establish themselves – now probably more than ever – as a listening partner for strategically important clients.
- A significant increase in cost pressure from clients which is likely to result in increasingly transparent (and digitally supported) selection / pitch processes.
- To think through the current approach to pricing and, if necessary, develop alternative models.
- An increasing expectation to understand the client’s industry, its dynamics and the business challenges that also in particular arise from the crisis.
- To adapt product and business development to new market conditions.
- To focus on crisis related advice, i.e. finance, employment law, corporate law, competition and litigation.
1.3 Positioning & Strategy
The areas of action mentioned so far will continue to entail a high, albeit differently focused, need for legal advice from clients. We believe that the crisis will further strengthen the already existing segmentation and consolidation processes in the legal market. Thus, law firms should consider:
- Focusing more on the target groups that are highly relevant to them.
- Defining and marketing their services in a demand-oriented, client-led manner.
- Trying to achieve the leading position in their chosen market segment – or at least to become part of the leading group.
- Consistently defining measures and processes towards this goal.
- Understanding culture, i.e. the sum of all accepted behaviours, as the central basis of internal cohesion, internal functioning and economic success.
- Defining a purpose, i.e. the role and responsibility of law firms both as members of society and in relation to their own members of the organisation.
1.4 Law Firm Organization
The pressure to adapt a law firm’s own organisation to the new environment is increasing. This entails from our perspective:
- Relating to the business
- To define and establish two modes of operation, i.e. normal operation and crisis mode operation (i.e. an operation mode in crises caused by disruptive events such as pandemics or other factors).
- To adapt and optimise the economic structure in line with the firm’s positioning and strategy and the two modes of operation. This also includes rethinking and further developing controlling and management processes.
- Strong liquidity management, including, where appropriate, reduction / withholding of partner drawings in order to be able to retain staff for the period after the crisis.
2. Regarding their advice
- To rethink and reposition the way services are provided, in particular regarding staffing, legal project management and the inclusion of external service providers (hybrid service delivery).
- To push the digitalization of the firm’s own processes in order to be able to react and act economically.
- To find and firmly establish new forms of internal and external cooperation.
3. Regarding leadership and communication
- To develop communication skills on the firm’s positioning and strategy, on the associated internal change processes and on external, as well as possibly internal crises.
- To recognise the importance of leadership and decision-making ability and to establish appropriate processes.