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Addressing practice sustainability issues post COVID

Addressing practice sustainability issues post COVID

By Peter Docherty


COVID-19 has impacted the bottom line of most professional firms around Australia and the ramifications for Victorian law firms may be far greater than other states and territories because of the extended lockdowns. The extension of the Victorian Public Health and Wellbeing Amendment (State of Emergency Extension) Bill 2021 in the last week may add additional uncertainty as law firms try to move to the new normal.

Global research undertaken by several firms, including McKinsey and Company identified lessons that could be learnt from previous down turns and identified a number of trends re client demand, areas of practice exposure and short- term pressures. Not surprisingly most research has identified that existing trends are being accelerated and risks amplified as a result of COVID-19.

As a result of COVID firms are encouraged to review of their strategic plans, update their risk management frameworks and contingency plans and consider the impact of the following trends:

  • Alternative Delivery modes for legal services– Technology is an important business enabler and virtual delivery of services can cut the bottom line expenses. During COVID-19 technology has played a critical role in supporting business continuity. Having a virtual workforce can reduce expenditure for firms such as rent, meeting rooms and at the same time support staff retention, reduce travel time and support well-being. Virtual meetings are becoming the norm for clients who often prefer not to travel to meet.
  • Collaboration and Innovation – Facing the challenges of COVID-19 has meant that many firms are working more closely with their staff and clients, to refine practice business systems, client meetings, rethink how to deliver efficient meetings, workshops and client communication. Past LIV research has noted “many of the innovators are doing things that are not particularly new or original, such as using marketplaces and platforms to connect clients with services. What they are doing is applying those ideas and models to the legal services market”. Successful firms take a best practice approach by obtaining staff buy in from across a firm to develop, refine and promote new processes.
  • Specialisation vs Generalisation – There are differing views from commentators on which services will be the most impacted with a some suggesting transactional practices tend to contract during a downturn, whereas litigation practices tend to be steady. While some firms have been hard hit, new firms are emerging during COVID with practitioners made redundant identifying niche markets. How much a firm relies on their specialisation or a specific demographic of clients should be carefully balanced. If a firm’s focus is too highly dependent on a particular sector which generates a high percentage of income the impact could be massive.
  • Client Impact and Communication – While clients struggle to survive the impacts of COVID law firms need to revisit their client communication and engagement strategies. Monitoring the impact of COVID-19 on your clients will assist budgeting for contingencies, take preventative measures to manage the potential impact on your firm’s profitability and in some cases, unlock the potential to provide additional services. For communication to be effective it must be tailored, a single communication or management style will not meet the needs of all clients or your staff.
  • Pricing Models and Client Value – During any engagement the value of legal services may be questioned, however due to economic downturns like the GFC and now COVID-19 there is extra scrutiny of expenditure as clients try to cut costs. Pricing models have been debated in recent decades, in the LIJ March 2017 edition an article by Liz Harris explored Value, Pricing, Costs and the need for firms to understand the relationship between value, price and costs and how it fits within the uniform law. “If what is fair and reasonable equates with what is value to the client, then it is also necessary to accept the notion of price discrimination – that different prices can be charged for essentially the same service”. Understanding client value should be an element of your risk framework.

The LIV has explored many of these trends in the 2015 LIV report Disruption, Innovation and Change – The Future of the Legal Profession and in LIJ articles over recent years.

Managing a successful law practice relies just as much on the application of sound business principles as it does on hard work and legal expertise. Regularly reviewing your firms strategic plan, risk management frameworks and contingency plans support good practice.

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