Prioritising business services roles is key to law firms’ recovery
Deborah Gray, founding director at Totum Partners, explains why this matters
Two years of the pandemic wreaked havoc across businesses worldwide and the legal sector was not immune to the disruption. It caused many firms to make tough decisions as they refocused on their core priorities, leading to cuts across a variety of business services roles, including Marketing, Human Resources and Business Development teams. But with Covid restrictions now easing, law firms are gearing up for recovery and reversing their decisions to trim their business services roles having realised that they will be critical to their recovery.
When the pandemic first hit, 81% of the Top 100 firms in the legal sector predicted it would cause them to miss their financial targets, while 42% experienced a subsequent drop in profits, according to PwC. However, PWC’s 2021 Annual Law Firms’ Survey showed that 97% of the Top 100 UK firms outperformed their revenue and profit expectations, strongly positioning them to target growth again.
Significant investment committed to business services roles
This additional revenue is being committed overwhelmingly to business services roles. Nine of the top 12 roles in which law firms said they were making the greatest investments were in business services and related functions — such as those in finance, marketing, professional development, diversity, equity & inclusion (DEI), and recruiting — according to data from a recent Thomson Reuters Peer Monitor Staffing Ratio Survey. In fact, our own report in this area shows that 73% of firms expect to increase their business services headcount over the next year.
Today, senior business service roles at C-suite level, who often sit on the boards of law firms, such as CEOs, CFOs and CMOs, provide the strategic leadership to help drive their growth. Senior heads of Business Development offer the sales expertise to gain new clients and boost revenues, while HR heads help build the positive corporate culture to help retain law firms’ top talent and assist their external search consultants in attracting the brightest and best in the market.
In some firms, the average ratio of business services roles to lawyers is now 2:1, which reflects the enhanced importance of business services roles within the legal sector. Indeed, Totum has recently launched a new award, ‘Best Business Leader 2022’ to highlight the achievements of senior business service functions and to gain wider recognition for the importance of their roles.
War for talent
The pandemic has prompted many employees to re-evaluate their priorities and assess or switch their careers. It has been termed the ‘Great Resignation’, with over 40% of workers having thought about quitting their job or changing roles over the past year.
And a record 1.29 million job openings were advertised in the UK between January and March this year.
The legal sector has by no means been immune to this trend. So, with some 85% of law firms planning to expand in 2022, the legal sector is set to face a fierce battle for talent. At the same time, 93% of firms do not plan on losing any current members of staff. It means that talent retention and recruitment is a crucial priority.
With some recruitment experts expecting senior professionals could see their salaries rise by as much as 25%, law firms are facing fierce competition to retain the best legal and business services talent.
Across business services roles, particularly at more senior levels, salaries have been rising rapidly. For instance, senior HR professionals in the legal sector are closing the pay gap with their senior legal colleagues. In fact, many HR Directors are now receiving similar salaries to those commanded by Partners across some of London’s leading firms . HR leaders are fundamental to the continued success of many law firms, and it is no surprise that 73% of firms said that business services teams involved with people and HR was a priority.
These rising salary rates reflect the increasing importance of business services roles, not only to provide the critical infrastructure which helps ensure that legal professionals perform to their best, but also as part of the senior management team that helps set the course for law firms and provides strategic insights and depth of market understanding that will help firms accelerate their recovery.
Value of business services roles is evident
The value of these business services leaders is evident from recent research which reveals that highly effective managers actually drive 48% greater profits for their organisations. As law firms have been faced with significant financial and corporate challenges, it has been the strong leadership across these business services teams which has enabled firms to stay on track.
Law firms, like other businesses, are doing their best to reflect shifting norms and trends in society. Two of the most significant are the drives to enhance diversity and inclusion among workforces and the prioritising of implementing ESG principles by businesses. Increasingly, law firms are appointing senior business services professionals to manage these two areas, as they seek to make their firms as contemporary as possible in operational ethos and working practices, and also as attractive as possible to both retain existing employees and attract new talent.
Business services roles at the heart of law firms’ recovery
As we transition out of the pandemic and law firms target growth again, business services roles will be at the heart of every firm’s recovery and growth plans. In particular, it is the leaders across these teams who will continue to rise to the task of keeping firms on track amidst ongoing economic uncertainty.
Business services roles will help law firms address the big strategic challenges that they will face in the years and decades to come. How will they embed ESG best practices in their operations and cut down their own carbon footprint? How will law firms cope with the digitalisation trend sweeping through economies and businesses? With the metaverse rapidly moving from concept to virtual reality, how will law firms approach working in this brave new world? All these are fundamental questions, and business services roles will be key to supplying the answers.