What Kept Law Firm Leaders Awake in 2022
By Gus Sellitto
January 13, 2023 | 4-minute read
Business of Law Business Structures and Trends Content Type Blog Post Additional Options Content Level: Essential
The legal services sector has proven its resilience in the past few years. Many law firms weathered the challenges of the COVID-19 pandemic well, and some even delivered stellar financial results for the 2021-2022 financial year. But 2022 took an unexpected turn and presented law firm leaders with a different and complex set of challenges compared to the previous two years.
Earlier in 2022, Byfield, the UK’s leading legal sector communications and PR consultancy, conducted a survey about the key issues keeping managing partners up at night. In the survey, law firms were asked to select their top five business concerns from a list of 10 factors, as well as rank these factors by level of reputational sensitivity.
While the Russian invasion in Ukraine, the sharp rise in inflation, a looming recession and greater geopolitical instability are some of the things keeping UK law firm leadership teams on their toes, the war for talent has topped the list of key business and reputational concerns among managing partners and senior leaders.
The survey found that 95% of respondents put the war for talent in their top five business concerns. Around 90% of respondents ranked it as one of the top five reputational challenges, and 55 % singled it out as the most reputationally sensitive issue.
There is also an understanding among law firm leaders that, while most firms cannot match the hefty salaries of top U.S. and magic circle firms, good reputation, management and strong employee value proposition can play an equally important role in rising a firm’s attractiveness and differentiation in today’s fiercely competitive talent market.
The combination of the fierce talent war and the worsening economic climate is likely to define the coming year and create the greatest challenge for law firm leaders.
Internal issues also featured high on the list, from both a business and reputational perspective. Getting hybrid working right was in the top five business concerns of 64% of respondents and received the second highest number of votes after the war for talent. Meanwhile, culture and conduct issues came in joint third place at 50%, along with client pressure on fees and controlling rising costs in an inflationary environment. These were followed by the risk of recession at 45%.
From a reputational perspective, the risk landscape looks slightly different. After the talent war, controlling costs (63%) was seen by respondents as the second most risky aspect of managing a firm. Culture and conduct issues came third with 59%, while cybersecurity came in fourth with 55%. Half of the participants put getting hybrid working right in the top five reputational concerns list. These top five reputationally sensitive matters were closely followed by client pressure on fees, getting the ESG balance right and attaining diversity and inclusion targets and objectives.
The survey underlines that the biggest worries center around people and culture, as well as managing costs and client expectations against a backdrop of great economic uncertainty. The combination of the fierce talent war and the worsening economic climate is likely to define the coming year and create the greatest challenge for law firm leaders.
Perhaps the most intriguing finding of the survey is the increasing alignment between law firm leaders’ business concerns and reputational concerns. Four of the top five business concerns in 2022 — the war for talent, controlling rising costs in an inflationary environment, culture and conduct issues and getting hybrid working right — are also issues that law firm leaders see as the most reputationally sensitive.
There is a high level of understanding and awareness among partners that the main business concerns are closely interlinked with the areas where reputational risks can strike, having a profound impact. To make good business decisions that produce positive commercial outcomes, managing partners will increasingly have to take careful reputational considerations and deploy effective branding and communications strategies.
Record-breaking financial results can impress the market, but it is a firm’s reputation and effective two-way communications between it and its internal and external stakeholders that will ultimately lead to sustained success and competitive advantage.