Full text of my opinion piece first published in the Australian Financial Review on 6 March 2020.
A law firm’s budget and its five-year projections are based on key assumptions around staffing costs and productivity. The recent Fair Work ruling could potentially blow these assumptions out the water.
The key lesson is to be prepared for different scenarios and have contingency plans in place for some award mayhem.
The Fair Work Commission has ordered law firms – from March 1 – to record all hours worked by graduate lawyers and paralegals to ensure they are not paid below minimum rates or are losing out on penalties if they work long hours.
It is unclear how many junior workers will actually take advantage of these new provisions as the enforcement of an industrial award runs counter to the professional culture in most law firms.
Moreover, the bargaining position of juniors is weak because of the oversupply of graduates. Council of Australian Law Deans data revealed that Australia’s 39 law schools graduated 7,583 students in 2015. Less than 40 per cent of those students will get legal traineeship positions in law firms.
Despite these constraints, it is not hard to imagine some overworked grad preparing a spreadsheet to prove they’ve been paid well below the minimum wage per hour and claim a bonus – say 20 per cent – for overtime. News of this payment would spread quickly and Fair Work claims would soon become commonplace.
Three scenarios
Only time will tell whether that happens, but it is worth doing some scenario planning to assess the potential impact.
There are three Fair Work-related scenarios worth considering.
- One is a business as usual situation, with the take up being minimal.
- Two is that it will be the new norm, with most graduate lawyers and paralegals claiming their full entitlements.
- The third involves bracket creep, with claims for overtime and penalties extending all the way up the pyramid to associates and senior associates.
If you want to have a sleepless night or three, ask your chief financial officer to model the financial impact of the bracket creep scenario at your firm. With staff comprising about 60 per cent of all costs, the profit hit could be huge.
However, one could argue that hard cash overtime penalties will force more firms to adopt more sustainable work practices, which might improve the mental health of a notoriously fragile profession.
Contingency plans
Planning for the bracket creep scenario will likely involve better resource management, supervision and cross-practice collaboration.
For example, most firms do little to even-out workloads where some teams are operating way above capacity and others well below. If a firm suddenly has to pay overtime for a team operating at 150 per cent capacity, you can bet a lot more effort will be made for practice leaders to collaborate and share resources.
While specialist lawyers are clearly not interchangeable, smart and well-trained lawyers are quick learners who can work flexibly across the firm.
Bracket creep could exacerbate bad work habits amongst some partners, but force a change in others.
The hoarders will try to save costs by delegating even less and doing more work themselves. On the other hand, some partners might finally get the message that the key to practice profitability is to optimise leverage, to redesign workflows to make them more effective and efficient, and to lead teams with a style that’s communicative and empowering.
A big increase in staff costs may push some lead some firms to look more closely at legal technology, especially where it could be used as a substitute for labour. The economics of automating contract preparation and review would suddenly become far more attractive. There would also be more incentives to use non-award staff to do legal process work.
My prediction
On balance I think the first scenario – business as usual – is the most likely. But all firms should be considering this question: what would do if awards governed your rewards?
business development, client relationships, culture, governance, planning, professional service firms, strategy management
A post-corona legal world: more kindness, less paper
In Articles, Commentary on 4 April 2020 at 4:45 pmFull text of opinion piece first published in the Australian Financial Review on 2 April 2020.
At some point later this year or early next we will move into a post-Corona world. What might that world look like from a law firm perspective? On my reckoning, it will involve deeper relationships, less paper and more flexibility.
Deeper relationships
There is much research that shows that people that go through acute stress together come out at the other end with stronger relationships. War is one of the greatest stresses anyone could ever encounter yet it also often leads to deep human friendships and incredible acts of heroism and sacrifice.
As Stanford’s Emma Seppala states, “Understanding our shared vulnerability — that life makes no promises — may be frightening, but it can inspire kindness, connection, and desire to stand together and support each other.”
To illustrate this point, I heard a story this week of a law firm partner checking in every day with every person in her team via Zoom. These check-ins covered some work matters but mostly were about sharing the fears, loss, grief and the black humour of the pandemic and the remote working experience. She said she encouraged her team members not to avoid interruptions from partners, kids and pets during the video calls.
The partner indicated her surprise as to how deeply personal the conversations had become, and how much closer she felt with her team members. Seeing her team members at home interacting with loved ones added a whole new level of understanding and appreciation of them as individuals.
She imagines a post-corona world with much deeper social connections – with staff and clients. Going through a crisis together can help engender trust and understanding, the foundations of all solid business-to-business relationships.
Source: AFR
Less paper
Over the past decade, many law firms have invested in sophisticated and expensive document management systems to reduce paper, streamline processes and improve control. It is a common experience that firms don’t realise the full benefits of these systems because a small group of lawyers, often senior partners, refuse to change their habits and prefer to edit in hardcopy only and/or keep paper copies of everything.
The coronavirus has forced some law firm partners to change their rusted-on work habits in about one week. When the hardcopy file is inaccessible and no assistant is at their side, only then will the penny really drop that a change is required and the painful process of stepping outside comfort zones will commence.
In a post-corona world, there will be less paper and greater compliance with enterprise-wide systems that promise so much but often deliver less. Allied to this there is likely to more defined workflows, greater support for cloud-based applications and better use of deal platforms.
As legal project management expert Ron Friedman notes, “Litigation and investigations have long employed [and co-located] armies of contract lawyers to review documents for responsiveness and privilege… The technology exists for secure, remote document review. Though supervision and collaboration may be harder working remotely, it does tap a much broader labour pool [and meet social distancing rules].”
More flexibility
Pre-corona, flexible working arrangements were mostly the exception rather than the rule in law land. The past two weeks have reversed this statistic.
The generally positive experience of meeting via videoconference, accessing files remotely, collaborating online on shared documents and engaging staff and clients virtually has brought a new realisation: actually, we don’t need everyone at the office all the time. If people want the option to work flexibly it can be done without destroying productivity or team dynamics.
While I don’t foresee a shift post-corona to complete remote working or agile office set-ups (that is, an office with no allocated desks), I would expect firms to be far more comfortable with people seeking flexible work arrangements that include some regular time working from home or other locations outside of the office.
Remote working must be balanced with having a team congregate in one space to collaborate to solve complex client problems, to share knowledge and to socialise. There is still no technological substitute for face-to-face interactions and the serendipitous opportunities that come from overhearing conversations – and unexpected bumping into colleagues in corridors and kitchens.
In conclusion
In conclusion, the post-corona legal world will be different. While there’s a lot to fret about, there are also some important positives to reflect and focus on.
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