Legal industry professionals say prospects for their future legal business look bright, but cite pricing pressures and cybersecurity as the biggest challenges their firms face, according to a recent survey published on The American Lawyer. The survey, conducted by legal software company Aderant, indicated that law firm professionals have a rosy view of their potential business. More than half of the survey’s respondents—some 57 percent—reported that business was “better” or “much better” at their law firms than it was over the prior year.
Beyond the survey’s findings about law firms’ business optimism, Aderant also asked respondents to name the most significant challenges facing their firms. According to the survey, the top five challenges facing law firms included pricing pressure, cybersecurity, operational efficiency, technology adoption and competition. Among respondents polled from US firms, cybersecurity jumped from sixth place in this survey the previous year to tie for the top spot with pricing in 2018, (as quoted in The American Lawyer).
The survey also included questions about innovation and new technology. While innovation is a hot topic in the legal industry, Aderant reported that more than 70 percent of respondents said their firm does not have anyone on staff specifically dedicated to innovation. But that response changes as law firm size grows, according to the survey. Just shy of 56 percent of respondents from firms with more than 500 lawyers said their firm had a staff member focused on innovation and new technology issues, (as quoted in The American Lawyer).
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Firms are taking a more analytical approach to partner compensation, reports LegalTech News. While partner compensation has traditionally been calculated in a more subjective manner, experts from legal software producer Aderant posit that “analytical models should be the best practice for determining law firm compensation.”
Dan Ronesi of Aderant argues that although law firms have started utilizing profitability as a metric for the firm itself , many are still hesitant to use this approach to calculate partner compensation. Aderant cites perceived lack of access to data and inherent differences in profitability between practice areas as two potential challenges to the adoption.
LegalTech News further quotes Ronesi as advising to “locate the profit that one’s generated instead of the revenue that one’s generated,” since revenue, if increased inefficiently, does not necessarily lead to increased profitability.
Ronesi identifies three future trends in firm operations: using better technology to track these metrics, looking at the numbers more frequently to create new opportunities, and increased use of profitability in the compensation models (as quoted by LegalTech News).