Law firms’ top 5 business challenges revealed
While competition in Australia’s legal market continues to climb, there appears to be five significant headwinds gaining ground.
CommBank’s Legal Market Pulse has identified the top five business challenges which law firms believe are making an impact on the way they do business.
According to the report, negotiating prices with clients remains the most challenging condition among law firms, with 70 per cent of respondents identifying this as the top concern. In comparison, last year’s report revealed that 76 per cent of respondents selected this as a business challenge, indicating a slight decrease for this year’s report.
Winning new business was highlighted as the second business challenge affecting law firms, with 63 per cent selecting this option. This is up from last year where 61 per cent identified this as a business challenge.
This was followed by keeping staff fully satisfied, with 45 per cent selecting this option (down from 53 per cent in 2016); competing with other firms, with 43 per cent selecting this option (down from 53 per cent in 2016); and collecting invoices, with 33 per cent selecting this option (down from 45 per cent in 2016).
“Firms continue to report that a changing market has created highly challenging conditions,” the report said.
“Feedback from survey participants suggests clients have been seeking both greater value and increased price certainty, with an increasing number of firms exploring value-based alternatives to hourly billing.
“There has also been no improvement in the proportion of firms who find winning new business challenging, especially in the top tier[s] (six out of eight firms).
However, firms have become slightly more likely to say that competing with other firms is manageable (52 per cent) or easy (5 per cent) than challenging — suggesting that the initiatives many firms have taken to improve their competitive position are beginning to gain traction.
“Concerns about staff utilisation have also eased, with a number of firms reducing headcount or changing their staffing mix in response to altered market conditions.”
Earlier this year, Lawyers Weekly conducted its first ever Disruption Snap Poll, hearing from a pool of respondents who were asked to share their thoughts on what technological disruptors – such as AI and big data – and economic/market disruptors – such as NewLaw firms and flexible working arrangements – would most heavily alter the way legal services are delivered.
To find out the former, respondents were asked: ‘In the next 12 months, which of the following technological disruptors will have the biggest impact on the legal industry? (You can select more than one)’
Intelligent contracts and e-contracts were cited as the biggest technological disruptors believed to impact the legal industry in the next 12 months, followed by social media, e-discover technology and big data.
To find out the latter, respondents were asked: ‘In the next 12 months, which of the following economic/market disruptors will have the biggest impact on the legal industry? (You can select more than one)’
Corporate counsel handling more work in-house was highlighted as the biggest disruptor to affect the legal industry in the next 12 months, followed by the outsourcing of legal work, boutique firm specialisation, graduate oversupply impacting remuneration and the morphing of law firms into more general business advisory firms.
To check out the full results of the Lawyers Weekly Disruption Snap Poll, click here.