Posted by Robert Blech, a professional practices partner at Legal Futures Associate MHA
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Blech: For the first time since Covid, firms can focus on growth
In collaboration with the Law Society, the professional practices team at MHA has written a report, Strategic insights for the legal profession in 2025: Mid-sized firms, based on survey results from law firms in England and Wales with between eight and 50 partners.
The aim of the survey was to understand the key strategic priorities for law firms in 2025, including financial, technological, environmental and social development. The results indicate that growth is seen as a key target in 2025, although rising costs are seen as the main obstacle for achieving this.
Mid-tier practices are looking to grow both organically, or by a merger/takeover, and our survey revealed that 17% of firms are intending to pursue an acquisition strategy over the next 12 months.
Such a strategy succeeding depends on all the components of the business being aligned and retaining key staff is seen as essential. There is a disappointing statistic that fewer senior staff have an appetite to progress to partnership. This may be due to fewer individuals being inclined to assume joint and several liabilities.
It seems that this downward trend has continued since the publication of the Law Society’s annual statistical report in November 2023, which revealed a decline in partnership numbers. The role of a partner carries added responsibilities, of course, and it is evident that many professionals prefer to focus solely on practicing law rather than taking on business management duties.
In the post-Covid working world, expectations and demands of employees have changed and firms have had to adapt to this. Reports indicate that since Covid-19, around 88% of law firms have adopted some kind of flexible working policy, allowing employees to work from home and adjust from the traditional 9-5 working hours.
This shift has become standard practice across most firms, including mid-sized practices, and employees may look for opportunities that provide greater flexibility if their current employer does not meet their needs. This is particularly relevant now, as some firms are tightening their policies by restricting the number of days staff can work from home.
Our survey revealed that most firms (84%) report increased or comparable levels of productivity under their hybrid working policies. However, this improvement has come at the expense of office culture, with 31% indicating that it has worsened, outweighing the 29% of firms that saw an improvement.
Net profit in the last financial year of up to £4m was achieved by 85% of those firms surveyed. Businesses outlined a range of options as to how to increase that figure over the next 12 months including raising charge out rates, reducing costs, and more marketing. Streamlining procedures was another move which would result in better efficiency across work processes.
Although only 25% of those surveyed are currently using artificial intelligence (AI) within their business, others are intending to explore it in relation to Co-Pilot functions, marketing and admin tasks. Overall, however, there is concern that in the short-term AI remains unpredictable, and how it can be best utilised within the profession.
We also asked firms about their plans for their workspace over the next 12 months, and 80% are looking to open a new office or expand their premises either in the same or different location. This may indicate more of a trend towards pre-Covid working trends and intentions to grow.
The survey generated a very wide range of responses in relation to firms’ attitudes towards and progress on ESG (environmental, social and governance) issues. The most common theme was high levels of awareness of equality, diversity and inclusion, but there does seem to be progress on environmental matters too.
Additionally, ESG actions are now considered more important in the recruitment process, although the cost of implementing policies is seen as a barrier to further development.
In conclusion, the survey produced some interesting insights into how a range of mid-sized firms view the strategic landscape this year. It seems that for the first time since Covid, firms can control their focus and strategy on growth.
Financial success, however, will not be the only measurable of growth, but also responses to technological change and progress with ethical responsibilities. People, however, remain the core to achieving and maintaining a successful law firm, so ensuring retention of staff and having a good recruitment process are essential.
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