Cutting expenses and reducing overhead helped some law firms not just survive the pandemic, but thrive in it.
For others, the key was focusing on the demand side by increasing client outreach.
Those are two insights from the Pandemic Performers Report 2021, just released by Thomson Reuters.
“Why did some law firms handle the recent global health crisis better than others? Our new Pandemic Performers 2021 report sheds light on what top firms did to make the difference,” according to Thomson Reuters. “Law firms adopted a wide range of strategies to stabilize their operations and increase the likelihood of financial success. Some firms, fearing a stark drop-off in demand, made deep cuts in expenses to better their chances of remaining profitable. Other firms took a longer-term view, maintaining investment and hoping such investment would provide a competitive edge as the pandemic dragged on.”
Firms identified as “Pandemic Performers” placed in the top quartile of firm performance based on Revenue per Lawyer (RPL) growth. The report found that these top performers were prepared to weather the crisis because of their firm cultures and working practices.
“Demand held up well, especially in the latter half of the year,” the report says. “With revenue per lawyer (RPL) remaining stable and cost per lawyer down, most firms ended up actually increasing their profitability for the year. However, firm performance varied greatly, and the reasons for success or failure weren’t the same at every firm. Some law firms achieved both revenue and profit growth, others saw their revenues shrink and profitability fall, and many more landed somewhere between these two poles.”
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6 Takeaways from the Pandemic Performers Report 2021
- Resilience. “Pandemic Performers were shown to be more resilient and able to leverage their scale, diversity, brand, and their support for their lawyers,” according to the report. “These firms practiced good financial hygiene; and above all, they were more likely to take a long-term view.”
- Not dependent on litigation. Pandemic performers tended to be less concentrated in litigation.
- Close eye on spending. They also paid close attention to their overhead expenditures.
- Optimized talent. Top performers made sure to hire and retain top talent. Their cultures emphasized diversity and inclusion. They valued collaboration and creativity.
- Financial hygiene. Successful firms managed their fees and rates, and they used efficient and effective billing practices.
- Client appeal. Having a strong brand helped firms weather COVID, as did healthy relationships with businesses and individuals in their communities.
Source: Thomson Reuters
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