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The below is an extract from ‘The Law’ a publication by Armstrong Watson. It is an interview with Jim Thomas, Managing Director at PDW Group, specialists in all aspects of business performance improvement.

1. What are the typical challenges you see facing legal firms right now?

The challenges are numerous, and include continued economic pressures impacting on trainee recruitment numbers and various firm wide cost cutting measures, as well as many clients being more fee sensitive and looking for cheaper alternatives. An increasing number of law firms are merging or looking at doing so which is clearly changing the competitive dynamic in the marketplace.

The SRA has been conducting its fair share of changes to regulations trying to reduce bureaucracy and improve access to the profession but these changes offer their own challenges. People continue to be a key challenge to law firms, including how well they are led, managed and developed, their reward mechanisms and the diversity and mobility of the workforce.

2. So how can law firms improve business performance?

The two main underdeveloped and highly ‘influenceable’ opportunities that can transform performance in law firms in our experience are

1) People engagement – the most successful firms put their people at the heart of their business, with the senior leadership of the business setting the tone by ensuring that values and behaviours are a high priority for all and not just some words on their website; and all line managers are confident and capable to engage in all aspects of people and performance management with their teams.

2) Client advocacy – the most successful firms are truly client centric, so rather than just delivering their services as best they can, they also focus on properly measuring and developing client advocacy and ‘make this cultural’, that is to say that during the process of service delivery, external efforts are also pointed at gaining a deep understanding of their clients, with key client messages informing the firm’s strategic choices, and any ‘gaps’ in client specific service quality perception acted upon.

The vast majority of law firms that we know are either woefully or partially lacking in one or both of these regards.

3. All firms say they’re different, what genuine differences do you see in the market?

Most law firms claim to be ‘different’, but the perception of most clients, private or business is that there is not much difference on the surface. It’s highly unlikely that there is much competitive edge to be gained through the products and services themselves, and these days clients just assume technical capability, so there’s little to be gained there either, although so many lawyers still seem to believe that’s the case.

In our experience true competitive differentiation comes from the people, the way people behave and the way the business is run. So the ‘right people on the bus sitting in the right seats’ is an absolute foundation, and there are then a further ten or so fundamental principles of great businesses that are irrefutable, and the more of these the law firm is able to develop and ‘demonstrate’ the more profitable it will be. These components cover a broad spectrum including the quality of leadership, financial management, job and team role clarity, values, and regular open and high quality one to one conversations within the business and with clients…….and the ‘F’ word in business…FEEDBACK!

4. What could a typical law firm learn or adopt from successful businesses in other sectors?

All of the above. There are a handful of great businesses in the UK, and a larger handful who are working hard to ‘be great’, and most law firms could adopt many of the principles and approaches of these great firms, a taster of which is in the previous answer.

5. What are the key questions that equity partners should be asking themselves about the future?

Let’s start with these for now. How great is the business in which I have a stake…..and more importantly, what do our clients think, and what do our people think? Are we really the very best law firm to do business with? And are we really the very best law firm to work for?

Depending on the answer to those questions, ask yourself, how much do I want my business to be great or am I just happy the way it is? If the former, then there is more than likely some work to do, some comfort zones to step out of, and some step changes that have to be made….but in our experience, it will be well worth it in the not so distant future.