Top trends, challenges, and advice for law firms in 2018

Andrew Arruda
January 8, 2018

A conversation with legal industry consultant Kent Zimmermann on what to expect in 2018 and beyond in law-land.

As a former general counsel and chief executive officer and advisor to leaders of Am Law 100, 200, Global 100 and leading specialty firms, Kent Zimmermann understands the legal industry inside and out.

Zimmermann specializes in strategic growth planning, law firm mergers, and client service interviews and as part of this work with the Zeughauser Group routinely conducts one-on-one, in-person interviews with chief legal officers, managing directors and business unit heads of Fortune 500 and global companies.

In other words, Zimmermann knows what he is talking about — so I sat down with him to discuss the top trends, challenges, and advice for law firms in 2018 and beyond.

Right off the jump as we just started this great new year, what are your predictions when it comes to the legal market for 2018?

We will see the pace of mergers accelerate further. Many deals will be driven by firms that want to grow their depth in less rate challenged sectors, practices and geographies.

Many of these deals will present opportunities to enhance profitability by addressing overcapacity, shrinking in highly rate pressured areas and by adding high quality bench strength in higher rate areas.

Combinations will also increase the resilience and profile of many firms while also growing their profit pools. Enhanced profit pools will give combined firms more money to spend on sought-after talent, AI, cyber security and other technology.

Things continue to change in law-land, what do you think are the biggest challenges firms will face this coming year?

I see the challenges firms will face breaking down into four main buckets:

  1. Even greater downward rate pressure, particularly for work in areas where a firm is undifferentiated.
  2. Even greater overcapacity, especially as demand remains soft in the face of a strong economy.
  3. Even greater pressure to use AFAs even as many firms still struggle to identify, collect and use data on their matters that would better inform this effort.
  4. Even greater pressure to identify, develop and manage effective practice group and sector team leaders.

Articles, papers and the word on the street continue to state that there are major shifts happening right now in the legal market, things like the continued consolidation of firms, greater emphasis on legal technology by firms, and many others, in your opinion what are some of the top trends you are seeing now?

Consolidation, greater competition for sought-after laterals, greater downward pricing pressure, more investment in AI and other technology and less loyalty among sophisticated clients are among the accelerating trends to watch in 2018.

I think we will also see more law firm data breaches which will lead to more investment to address them.

In a market with great downward pricing pressure, not overspending to get the work done will be critical to protecting and enhancing profitability. As a result, high performing firms will increasingly price and staff matters with an eye toward increasing profitability.

High performing firms will also continue to set high expectations for whet it takes to become and remain a partner in the firm. Many will shrink their non equity tier and other parts of the partnership to the extent they are underutilized and an expensive form of leverage relative to other options to get the work done.

As a member of the Zeughauser Group you have a unique opportunity to chat to a wide range of leaders and organizations in the industry, what are some things more firms should be paying attention to that they might not be as dialed into right now?

Kent Zimmermann 2018 law

Many firms should be focused on getting lean in advance of a down economy. Those firms that have gone in to previous down economies with less overcapacity have come out stronger on the other side.

Many firms also have an opportunity to learn from Latham and other high performing firms on topics such as investing in AI and other tech, being disciplined about discounting and having a low tolerance for chronically underperforming people, practices and offices.

I’ve given you a magic wand and you are in charge of what law firms begin prioritizing in 2018 and beyond, what would firms start doing?

The smart firms would build their depth, quality and distinctiveness in less rate pressured areas.

They would also shrink to grow profitability, decrease management distractions and build their preeminence in higher rate, less commoditized areas.

Smart firms would also change their mix of clients and matters to do more works for clients who pay their rates in less for those that don’t.

Lastly, in light of the changing market, smart firms will revisit their strategic plans to update and build consensus around a 3–5 year vision and goals

Following up on the above question, what would firms stop doing?

This one comes down to a list of three:

  1. Being permissive of non-strategic discounting and chronic overcapacity.
  2. Chasing revenue rather than revenue that enhances profitability.
  3. Trying to be too many things to too many people.

Lastly, in your line of work I’m sure you have seen that most new ideas at firms are tough to get internal champions around, what are your tips for folks who aim to bring change to their firms and organizations this coming year? How should they best approach bringing in new legal technology for example?

Kent Zimmermann gives advice for law firms in 2018

First you need to get the voice of the client in to the conversation to lead the way. Clients of strategic importance can be remarkably influential, even with the most skeptical partners.

Second, benchmark use of new legal tech under consideration against aspirational peers to drive change. Firms often want to follow the lead of their aspirational peers.

Lastly, consider to what extent the change a firm is evaluating may be necessary to achieve its aspirations. The question is, can the firm achieve its aspirations without the change under consideration?

Thanks for the great conversation Kent! Can’t wait to chat again soon!

Andrew Arruda

CEO & Co-Founder of ROSS Intelligence. International speaker on the subjects of AI, legal technology, & entrepreneurship and has been featured in publications such as The New York Times, BBC, Wired, Bloomberg, Fortune, Inc., Forbes, TechCrunch, the Washington Post, and the Financial Times.