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How the legal profession can avoid a 2009 repeat

How the legal profession can avoid a 2009 repeat

As the economy continues to recover, legal employers and their lawyers should not become complacent and never forget the lessons of the downturn, writes Mike RussellThe year 2009 could be said…

As the economy continues to recover, legal employers and their lawyers should not become complacent and never forget the lessons of the downturn, writes Mike Russell

The year 2009 could be said to be the legal industry's "annus horribilis". It was an undeniably difficult year across the board, as the economic downturn sapped confidence, revenue and - ultimately - jobs. The country's leading law firms were forced to make several rounds of redundancies as the crisis began to bite.

As we enter 2010, a cautious optimism has emerged. With the industry newly streamlined and demand for legal services expected to rebound, what are the lessons that can be learnt from last year and what strategies must be employed to ensure Australia's legal industry makes 2010 its "annus mirabilis"?

Maintaining stability through the upturn

The green shoots of recovery have become visible in the legal employment market over the past few months. Firms have cautiously begun to hire again as budgets are extended and work across the board picks up. However, as recruitment recovers and the market becomes more buoyant, the legal industry, like all others, must be cognisant of the fact that if dissatisfied with their salaries and career progression, staff may look to find other employment opportunities as the recovery gains momentum.

Some recruiters have predicted that staff turnover could reach alarming levels moving into 2010. Recruiter Elvira Naiman, of Naiman Clarke (as quoted in The Australian, 30/10/09), said firms could face as much as 40 per cent turnover if they cannot meet staff expectations. The recruiter asserted firms could also face these issues with regard to support staff.

Having ridden out the worst of the downturn, law firms must now ensure they maintain consistency and continuity as they expand in 2010. To become trusted advisors to their clients, it is imperative to retain key staff.

The assertion that issues relating to staff turnover could extend to support staff is interesting to consider given the sentiment around current levels of support. A recent LexisNexis survey at the 2009 ALPMA (Australian Legal Practice Management Association) conference found a significant "support staff gap" between law firms' ideal levels of resource and those they are actually employing. More than 40 per cent of practice managers believed their current leverage ratio was 1.5 support staff or more per lawyer. However, a similar amount (44 per cent) believed that the ideal ratio was one member of support staff for two or more lawyers - a considerable difference that has an important impact on a law firm's bottom-line.

Practice managers, knowledge managers and other support staff are integral to sound legal counsel and efficient business practices. It's obvious that erosion of appropriate levels of support would dramatically impact on the ability of lawyers to do their jobs efficiently. Law firms across Australia must ensure they maintain the right balance of staff to maximise their impact.

The changing legal environment

The post-GFC world will look markedly different to the landscape that lawyers farewelled at the end of 2008. The past year has seen big changes to the legal environment, from a geographical standpoint and in terms of the practice areas that are now poised to reap rewards.

Financial, corporate and M&A work had a difficult year in 2009. Buoyed only by insolvency's success, the world of corporate law is due for a rebound in 2010. However, it would be short-sighted to expect an upswing due only to the financial revival and increasing levels of corporate legislation. There are opportunities elsewhere for lawyers enterprising enough to take advantage of them.

One area likely to see an increase in work is climate change. Despite the current political machinations, the Australian Government is committed to follow international obligations to reduce carbon emissions. Whatever the shape of the final trading scheme, businesses should start planning now to understand how much carbon they emit so they can implement a cost management strategy. This will inevitably involve legal consultation.

Law firms need to make sure they have the employee base and expertise to deal with the increase in work related to climate change. Whether it is through recruitment or training, law firms must evolve to capitalise on the opportunity that pending legislation provides.

Advances in technology send lawyers mobile

The stereotype that lawyers and technology don't mix is changing. The impact of technology on the consumer at large, let alone the business world, has hastened the overdue development of technological skills at law firms across Australia.

New generations of lawyers are growing up with an inherent reliance on technology and the ability to access information - anywhere and at any time. However, they must remember that a reliance on online information is sometimes not what it seems. Free online sources can easily become outdated and should never replace the meticulous research and in-depth experience that are the hallmark of a legal professional equipped with the best available information and tools. Law firms have an opportunity to prove their worth, by demonstrating what they can offer above and beyond this so-called "Google law". Value must be driven through the independent thought and analysis imparted, in addition to the legal information provided.

Another facet of the role of technology in today's legal sector is the ability for lawyers to be connected at all times. While mobile devices, including BlackBerries, are often criticised for their impact on social norms - be that in meetings or affecting work/life balance - such access to information is now essential and expected. For example, lawyers can now access full text case law through their mobile phones, enabling them to access the most up-to-date information, anywhere, any time.

Meanwhile, technology's impact on globalisation is inevitably leading to legal work being outsourced. Legal discovery in particular has been off-shored to take advantage of the lower price points available - both an opportunity and a threat to Australian firms.

Opportunities for work are no longer confined to the domestic market, and Australian firms are seeing revenue inflow from regions such as the US and the UK, while the borders of China and India are increasingly dissolving. However, traditional domestic work is also beginning to leave the country for locales which can offer it at lower cost.

2010: Opportunities and challenges

The aftermath of the GFC is the perfect chance to reappraise both the internal and external practices of law firms across Australia. There is a significant opportunity as we move into 2010, but the year may also be one fraught with challenges.

Whether it is managing the impact of globalisation on firms, ensuring the availability of the relevant practice knowledge or addressing turnover and the "support staff gap", this year will be demanding for the country's legal industry.

Firms must make sure they heed the lessons of the downturn to understand how the legal landscape has changed. By maintaining client service levels, incorporating technology where appropriate and remaining nimble enough to adapt to sector trends, 2010 can be a successful year for Australia's legal fraternity.

Mike Russell is general manager of legal markets at LexisNexis Australia - LexisNexis is the publisher of Lawyers Weekly.

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