The past year (2021), a series of global lockdowns had subsequent effects on the economies globally. Most of the industries saw a decline in demand and hindering from further growth. Various factors were brought out to light as a result of the economic shift.
“The great resignation” followed the suit across the board. The legal industry saw a tremendous shift globally in the wake of the pandemic, optimally utilising the resources.
However, an objective analysis is necessary to understand how the global legal industry fared in 2021. Thomson Reuters released the Pandemic Performers Report: How some law firms found growth in crisis. In the article, we have laid some key observations from Thomson Reuters.
Pandemic Performers Report 2021
At the outset, the Pandemic Performers 2021 report points to what top firms did to make the difference in the tumultuous times and made them pandemic performers.
There is a striking contrast between pandemic performers and others (not necessarily non-performers), attributing to the resilience and the ability to leverage scale, diversity, brand, and support for their lawyers.
Further, the report encapsulated the key success factors and categorise them as:
- Firm pillars – economic of scale, less litigation concentration, maintaining overhead spend
- Optimised talent – inclusion of productive workforce, inclusive collaborative culture, service-oriented, creative thinkers, and people from the non-legal profession as part
- Financial hygiene – growth rate and strong billing realisation against the standard and agreed/worked areas
- Client appeal – brand appeal, association to active industries, win work
The ghost of “The Great Resignation”
Pandemic brought with it a new catastrophe, which economists dearly refer to as “The Great Resignation”. According to the ABA Journal news piece, The winners in law’s ‘Great Resignation’ will be firms that focus on innovation, not compensation, the industry faced the wrath of attrition before the pandemic and since the beginning of the pandemic, the problem only aggravated.
ABA Journal report states that a 10% increase in associate compensation is recorded from the end of 2020 till the end of 2021 and appropriately termed as the ‘wage war’. During the pandemic, the industry followed the approach of higher compensation for better talent.
ALSP no longer an alternative
Thomson Reuters report on the growing ALSP market, reveals that the industry has reached a point of maturity. Alternate Legal Service Providers (ALSP) is more seen as a partner than just a cost-saving proposition, creating impact through its expertise, tech-enabled solutions, and new ways of doing business, especially during the pandemic crisis.
With its strong growth and mainstream acceptance, the report suggests that the ALSP is no longer an “alternative”.
Industry performance: Global indicators
United States: ABA Journal news article on State of profession 2021: BigLaw proves to be more resilient to Covid-19, states the turmoil of U.S. legal industry from March through June 2020, with apparent loss in business.
Subsequently, a few months into the pandemic as business began shifting from conventional to remote working with technology, the industry saw a surge in demand. Remote working, however, couldn’t fit well for female and colored professionals.
Many big firms reported revenue gains in 2020 and continued the spree at the end of 2021 amidst the economy’s continued recovery.
Mitchell Roth, Managing Partner of Much Shelist says after a few tough months at the start of the pandemic, the business has been “busier than it’s ever been.”
While the big law projected greater revenues and led the way, smaller firms struggled to sustain.
United Kingdom: Research gate report on UK’s Legal service market states that UK legal service market was valued at almost £ 37 bn in 2020, unchanged from 2019.
Thomson Reuter’s report on State of the UK Legal Market 2021 states that 86% of lawyers ask for hybrid work. Also, the report shows the trend of Brexit and its impact on the UK legal industry. UK clients are seeking to form long-term relationships with law firms, for which they are envisaging law firms to have specialist knowledge of their businesses.
Australia: Thomson Reuters’ legal market report states that Australia following the lead showed resilience in the pressing times. Australian legal industry a “beacon of innovation”. Law firms particularly showed profits in FY 2021, recovering from the pandemic draught. An average profit as a percentage of revenue over the last 12 months rose to 36.8%.
“Australian law firms have proven themselves extremely resilient in managing through the tremendous ups and downs encountered over the past year,” said Jackie Rhodes, Managing Director of Asia & Emerging Markets, Thomson Reuters. “In particular, the sudden shift to remote working can be considered a success for the Australian legal market, enabling firms to uncover new efficiencies while providing their legal talent the flexibility and balance they had craved,” Jackie added.
India: India Business Law Journal’s report on India’s Legal Market 2021 states the effect of covid-19 all across and the series of lockdown led to the economic crunch. However, the report shows that the demand for legal services existed during adversity. The report shows hybrid work mode is the most preferred medium for employees.
Revenue at the same time grew for around 59% of the firms that participated in the survey. Pushkar Thakur, the managing partner at Corrida Legal in Gurugram, agrees, and says: “Slowly the corporates are getting back on track, undertaking fresh transactions and expediting the recoveries.” Approximately half the firms reported higher profits in 21-22 than the previous year, showing the resurrection of the legal industry.
In a nutshell
While the pandemic posed challenges within the industry, from the great resignation to the global economic crunch, the demand for legal services did not decline at all. Out-of-the-box solutions and consistent technological evolution proved pivotal in the unbridled times.
The pandemic crisis also led to increased dependencies on ALSP, with more corporate legal firms opting for such services.
Despite adversities, the industry posted a jump in revenue even more so when most industries showed signs of decline.
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