The effect of Covid-19 has had a huge impact on office practices. In an industry largely stuck in the belief that for a law firm to function effectively, everyone had to attend the office all the time, Covid-19 has brought a new realisation that this is entirely unnecessary.
Many law firms looking to move offices are reviewing their entire approach to space and they are generally seeking much smaller offices than they would traditionally have envisaged. Law firms are also looking at office spaces as having other functions than just providing desk space.
Of course, training and mentoring has required a new approach as well. Young lawyers have traditionally learnt many of their skills by osmosis, by sitting with more experienced lawyers, listening and being taught face-to-face, and also by attending meetings. But the prolonged absence from offices due to Covid-19 has brought about an evolution in training and mentoring. It has required more thought by senior lawyers about how to engage with and train and their young lawyers.
There is no doubt that meeting up and working together in an office remains a positive. It would appear that three days a week working in an office, which seems to have become a relatively common practice, probably provides enough time to ensure that the benefits of face-to-face can be achieved.
Of course, home working has not proved popular for all younger lawyers with limited home space, or living in flat shares in expensive cities around the world. On the other hand, many lawyers have enjoyed the extra time available from not having to commute, and they have learnt equally from Zoom or Team meetings as everyone has had to get to grips with a significant amount of technology and apps to run their professional lives online and remotely.
Adopting effective technology is complex and expensive, as is developing it, but there is no doubt that technology and new solutions are making an increasing impact. The fact that the entire legal industry has worked remotely for significant periods of time over the past two years illustrates how all firms have had to get to grips with at least the technology that permits a firm to function with most, if not all, staff working remotely.
This is an extraordinary fact and of course it covers engagement with clients, court procedures and hearings. The Covid-19 pandemic has forced massive change. On top of that is the increasing use of technology to perform tasks done by lawyers. Contract review processes are predicted to speed up by 20-90% between 2021 and 2026, according to Legal Tech Artificial Intelligence Market Forecast.
The AI legal technology market is set to generate $37.8bn by 2026 at a compound growth rate of almost 3%, according to Zion Market Research. Lawyers will increasingly have to evaluate the available technology to keep up with client expectations as knowledge of that technology and its advantages increases, as it inevitably will. Then, the ability to invest in such systems will become a key challenge for law firms. As a result of improved technology, it is also likely that fewer lawyers will be required for certain tasks.
The Big Four
There is no slacking in the advance of the Big Four to offer legal services. Lexis Nexis reports that revenues of the Big Four in 2020 were:
- Deloitte $47.6bn
- EY $43.03bn
- PwC $37.2bn
- KPMG $29.22bn
With such muscle, these firms are able to invest in a way that most law firms cannot, in technology, acquisitions, marketing and also in making a legal offering just part of an overall package that covers accounting, systems, tax, technology and other expertise offered by the Big Four.
The same Lexis Nexis report estimates that KPMG’s revenues for legal services in the UK have increased from £12m to £45m from 2016 to 2020. Over the same period, EY have seen revenues increase from £48.5m to £100m. Interestingly, figures for EY and Deloitte are not available. The numbers of lawyers employed by the Big Four are estimated at:
- Deloitte 2,500
- EY 2400+
- PwC 3700
- KPMG 2750+
Offering integrated services appears to be the primary focus for the Big Four who see seamless service offerings as something many of their clients enjoy. At the same time, there remains real tension in terms of conflicts of interest and impartiality between audit and accountancy and consulting practices within these firms.
The reality is that many governments around the world work very closely with and rely upon the Big Four, who provide them with essential backup services and advice. As a result, there is no doubt that the Big Four have acquired considerable positions of influence and close political connections.
In response, an increasing number of jurisdictions are allowing law firms more flexibility to operate in other fields, but the movement has been slow. In the UK, ABS structures have allowed non-lawyer ownership and investment into law firms. Some firms have listed on stock exchanges to raise capital to enable faster growth and to provide. However, many jurisdictions have been slow to respond and to allow such changes, even where accounting firms have been permitted to set up or acquire law firms.
There is rapid growth in firms that have adopted a new structure, effectively offering a solution for entirely flexible working to entrepreneurial lawyers who no longer wish to be bound by the politics and processes prevalent in traditional law firms. Examples include: Gunner Cooke, Keystone Law and Setfords. Lawyers in these firms are, by definition, entrepreneurial and they have taken a decision to choose a different way of practicing. That may explain in part why these firms are seeing real success.
Lawyers only join these firms if confident that they have a practice that will sustain them, and many of the lawyers in these firms report greater collegiality than they have experienced in any of their previous firms. There are predictions that 25% of lawyers will be working under this model within the next five years.
These firms represent lawyers joining the threat towards conventional law firms because the earning potential is so much greater from a lawyer’s practice at these firms, with complete flexibility offered.
There is no doubt that the ability to service clients globally or in several jurisdictions will become ever more important. As such, the growth of firms and international networks show no sign of abating. More and more firms are increasing their global footprint to meet the increasing international needs of their clients. Smaller and smaller businesses need international support given their ability to trade internationally using modern technology, and this will continue to be a growth market for lawyers in 2022.