In a recently released report, we examine the mindset of US law firm CEOs and what they perceive to be the top threats to the continued profitability of their businesses.
Considering the past few years, in which the legal industry has achieved strong results despite the global pandemic, it would be easy to settle for the end of the worst times. Yet, as the legal industry shifted in the middle of this year, cracks began to appear in this genius facade.
Not insignificantly, many law firms have found themselves entangled in an ongoing competition for the best legal talent, which has increased their overall costs; at the same time, many also began to see the first hints that legal demand was slowing in certain practice areas.
Taking stock of all this, the new Law Firm CEO Report attempts to assess the mindset of the business leaders of American law firms – the managing partners as well as allied professionals who are responsible for managing the business operations of their firm and may be the proverbial canaries in the coal mine regarding future challenges for business results. This annual report is published by the Thomson Reuters Institute, in partnership with the Center on Ethics and the Legal Profession at Georgetown University Law Center and the True Value Partnering Institute.
The report shows that law firm business leaders see general economic concerns – inflation, potential recession, ongoing war, disruptions to supply lines and a charged political environment – as major threats to the continued profitability of their law firms. businesses.
Worries about general economic pressures were cited as a high risk to law firm profitability by nearly a third of respondents, twice the level of those who thought so in last year’s report
Indeed, concerns about general economic pressures were cited as a high risk to their law firm’s profitability by almost a third of respondents, twice as many as those who thought so in the report. ‘last year. In fact, these worries have moved to 2n/a place in the list of most cited risk issues in the survey, up from 9e place last year.
It’s as if there’s been an outward shift in the gaze of business leaders in law firms toward the uncertain world outside the office. Underscoring this, law firm business leaders identified fears of outside cyberattacks by illicit actors as their most concerning threat, with 42% of respondents citing it as a high risk to firm profitability. These fears about security breaches, hacks, ransomware demands and data loss marked its first appearance as a choice of survey option in this year’s survey.
Of course, the report only reflects a dismal thought. In a move to the positive, most business leaders surveyed said they expect at least a medium level of growth in many of their company’s practice areas, and even a high level of growth in areas of practice such as intellectual property and mergers and acquisitions. . And more than half (52%) said they expect a key financial metric, earnings per lawyer, to grow moderately over the next three years.
Yet even as law firm business leaders begin to shape their business strategy for the next few years by taking steps to improve their firm’s financial performance – raising rates, improving technology, supporting more labor distance and increase cross-selling across the business – many are at least keeping a wary eye outward on the horizon and wondering if these darkening clouds mean a more ominous future .