Thought leader

As an industry, law firms have had to cope with the most profound recession in their sector since the 1970s. In those days, however, the sector was smaller and a lot less mature. Twice, during the 1980s and 1990s, law firms profited from the stock market booms to achieve exponential growth and build the large European and global law firms that we know today.

As law firms experienced a period of virtually uninterrupted growth for nearly 15 years, they learnt how to professionalise their internal-management structures and developed strategies to exploit the growing market of cross-border transactions. However, when recession hit the industry in 2001, many management committees suddenly found that the strategies and structures they had devised needed serious rethinking. Many firms were caught by the iron logic of the markets and needed some form of restructuring to adjust their size and shape to a changing economic climate.

As the economy recovers, it is important to learn from past mistakes. For lockstep firms, the recent recession has been a harsh reminder that partnership elections are based on long-term considerations instead of short-term needs. One may question whether or not the old club-like partnership models will survive in an increasingly competitive environment. The economics of the law as a business as well as changing lifestyle expectations of a new generation of lawyers may force law firms to develop alternative career paths and a more diversified structure at the top of the pyramid.

The market for legal services has become much more price sensitive. Increased competition, cannibalisation of legal products and changing client expectations will force law firms to revisit their pricing models and value propositions. The sector will become more stratified on a global level and the players will have to focus on particular segments of the market.

Lawyers are always at risk of favouring rhetoric over action when it comes to management. The challenge for every law firm will be to effectively manage and guide their practice groups within the boundaries dictated by the markets without creating an oppressive internal culture.

Just as in any other industry sector, law firms will have to evolve continuously and adapt to changing circumstances. However, the legal profession is by its nature more reactive than proactive. The most successful businesses, in general, are those that are able to anticipate change.

The law firms that will succeed in the 21st century are those that can imagine and create their own future.

Jean-Pierre Blumberg is managing partner of Linklaters De Bandt, Antwerp. He can be contacted at jean-pierre.blumberg@linklaters.com