Back in January of 2017, we made 8 predictions about the legal industry for the upcoming year. You can read that blog post by clicking here. That was also our first ever blog post (sniffle, sniffle)! Is that the digital equivalent of a rookie card?
We gazed longingly into the Nimble Magic Eight Ball and tossed out these 8 predictions about the legal industry in 2017:
1. De-equitization of partners will continue. But after this short term fix, how will law firms fix the long term profitability issue?
RESULTS: This trend definitely continued in 2017 but as Above The Law recently published this short term strategy is not sustainable because of the impending retirement of many of the current equity partner ranks. We got this one RIGHT.
2. There will be a significant increase in law firms conducting client satisfaction surveys. "Made possible by a satisfied client" used to be printed on our law firm paychecks - law firms would be surprised by how quickly they could fix some client relationships from the data provided in client satisfaction surveys.
RESULTS: We probably got this one WRONG. It's hard to understand why this simple and great client service tool is not used with more frequency. In our first ever Legal Services Outlook Survey, we noted that only 18% of our law firm respondents had any sort of formal client survey process. Click here for the full survey results.
3. Law firms will begin to address operational inefficiency. Law firms have spent the last 8 years cutting costs to the bone. They'll figure out in 2017 that operational inefficiency and a focus on profitability will be the way to establish a competitive advantage.
RESULTS: Here's another one where it's hard to tell but we probably got this one RIGHT. Profitability has become a focus for many law firms in 2017. And we had a great discussion on operational efficiency and pricing strategies at the 2017 Nimble Forum in October. Click here to read more about the great discussions that we had.
4. Law departments will re-evaluate their staffing levels. In the last decade, the size of law departments has increased significantly. As General Counsel are tasked with ways to reduce costs, law departments will consider whether they've grown too large and their staffing is out of balance.
RESULTS: When you consider the early 2017 move of GE Tax lawyers to PwC (click here for more details) or the recent December 2017 move of most of the transactional lawyers from DXC to managed service provider UnitedLex (click here for more details), we got this one RIGHT.
5. General Counsel will continue to have budget constraints. The stock market might have benefited from a "Trump Bump" but law department budgets for 2017 have not.
RESULTS: The economy may be growing and the stock market is still a bull market but one thing that is not increasing is the law department budget. General Counsel continue to try to find ways to do more with less. This was something we covered at length at the 2017 Nimble Forum in October. A good place for General Counsel to start is with deploying metrics and our 19 Legal Metrics That Matter in Delivering Legal Service are a great starting point. We got this one RIGHT.
Legal Market Overall:
6. Litigation demand will increase for the first time in years but no where near pre-2008 levels.
RESULTS: We were way, way, way WRONG on this one. According to Thompson Reuters' Peer Monitor Index, through the 3rd Quarter of 2017, Litigation demand was down 2.2% from 2016 and was having the weakest performance since 2013. There's always next year!
7. Outsourcing of work to non-law firm vendors by both companies and law firms will continue to increase in frequency.
RESULTS: We got this one RIGHT. The arrangements noted above in #5 included a large outsourced component though neither wanted to characterize it as outsourcing. We addressed this new dynamic in The New Legal Service Delivery Paradigm. It would not be a stretch to say this trend will continue to build momentum.
8. The polarization of rates will continue. The result of which will drive law firms to #3 above in search to do work more efficiently and price matters using value based billing.
RESULTS: We got this one RIGHT. The hourly rates for routine, highly repeatable work - oftentimes called commodity work - can't keep rising to levels that aren't commensurate with the type of work. This is driving law departments to work with alternative legal service providers. Law firms will have to partner with alternative legal service providers to continue to service that type of work with corporate clients or risk losing that work altogether. Those that adopt new alliances will immediately gain a competitive advantage and will demonstrate an innovative approach to legal service delivery. This is something we addressed in Have Law Firms Failed to Anticipate Cord-Cutting?
Overall, we got 6 out of 8 RIGHT. Of course, we did our own judging so the results might be a bit biased. We just bought a Ouija Board for the Nimble office and are about to start our predictions for 2018.
We'd love to hear your predictions about the legal industry in the comments below.