Law firms may be at 'tipping point' for change because of COVID-19 pandemic, new report says
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Law firms learned lessons during the COVID-19 pandemic that could translate to permanent changes in the way that they manage their operations, deliver legal services and treat their employees, according to a report released Tuesday.
There are signs that 2020 and 2021 may be regarded as a “tipping point” for change—or at least a time for accelerated change, according to the 2021 Report on the State of the Legal Market.
Among the lessons learned during the pandemic were that working at home caused little disruption, and that a focus on well-being is important.
“Many firms have used the time of the pandemic to focus more attention on issues of wellness, work-life balance and the necessity of caring for their legal and administrative staffs in terms of physical safety, mental health and training,” the report says. “This has been a most welcome development and a useful reminder of the critical importance of supporting the most important asset of any firm—its people.”
The experiences of 2020 also emphasized the need for sound financial practices and made more firms open to new models of practice, including collaborations with other firms and “new law companies,” the report says.
Technology is also likely gaining greater acceptance. The change is reflected in this statistic: 84% of firms are planning to increase their technology budgets, the report says, citing information from an Acritas survey.
Other changes adopted during the pandemic include adopting a more efficient use of office space, changing levels of secretarial support, reducing business travel, and reducing expectations for in-person meetings.
The report cites a Thomson Reuters survey completed in October 2020, which found that law firms took these actions in response to the pandemic:
• 46% reduced partner draws
• 40% reduced the salaries of fee earners
• 34% furloughed support staff
• 32% reduced the salaries of support staff
• 36% discharged support staff
• 11% discharged fee earners
• 79% of small firms and 48% of large firms received government support, mostly through the Payroll Protection Program.
The measures resulted in “very strong growth” in profits per equity partner, according to the report.
“Firms will continue to reap cost savings from curtailed office operations, reduced travel expenses, lower administrative costs and the like,” the report says. “And those savings will certainly help offset any revenue hits they may experience” in 2021.
“Most law firm leaders are fairly bullish about the post-2021 market for legal services and the ability of the industry to bounce back from the current crisis. The intriguing question, however, is whether the industry that bounces back will be the same industry that entered the pandemic this past March,” according to the report.
Law.com is among the publications covering the report.