Saffery Champness has revealed the findings of its inaugural benchmarking survey of law firms, conducted in partnership with The Institute of Legal Finance & Management (ILFM).
The survey, completed by over 100 respondents from across ILFM’s member firms and consisting of both partners and finance staff within UK law firms, reveals that although average revenues are increasing, regulation and risk management continue to represent key challenges for law firms as does retaining top quality talent – with 84% of law firm partners citing talent retention as being among their top three business challenges.
Profitability and cash
In a year characterised by political and economic uncertainty, there are encouraging signs across the sector. Average revenues of surveyed firms increased in 2019 as respondents saw a median fee growth of 6.7%, with median fees per partner increasing to £696,000. Most firms surveyed reported growth across multiple work types.
The pressures around achieving satisfactory profitability from increased fees, and also converting fees into cash, continue to be key issues, with working capital management a high priority for all successful firms. The survey also showed an improvement in how quickly firms are converting work done into cash.
Cyber security and fraud protection
Cyber security and fraud protection was a key concern for respondents, with 30% considering it to be their greatest challenge. With the launch of a simplified set of Accounts Rules which place more emphasis on ensuring robust client money controls, alongside the ever-increasing risk of cyber-attacks and fraud, firms are facing a perfect storm of regulatory and risk issues impacting on day-to-day fee earning activities.
With GDPR now well into its second year, mitigating risks around data use and protecting the large amounts of sensitive information held by firms continues to be a key priority.
Workforce
Finding and maintaining a positive work/life balance for staff is key to a productive work force and the legal profession is no exception. When asked what was an important consideration in looking for a new job, over 40% of respondents cited this as their primary consideration, more than double the number of those who put salary first.
Flexible working was also a key factor and this gives a strong signal that, in the war for talent, those firms that embrace the technology and attitude to adopt flexible working styles will be the ones who attract the star players. This is particularly significant given that almost all partners (84%) who responded to the survey saw retaining high quality staff as their greatest challenge, while fee earner recruitment remains the primary focus of investment for most firms.
Jamie Lane, Lead Partner for Legal Sector Group, Saffery Champness in Bournemouth commented:
“Law firms have faced years or financial, operational and regulatory challenges, and there doesn’t appear to be signs of that slowing down any time soon.
“The legal sector is a prime target for cyber criminals who are not only interested in law firms’ client accounts, but also the sensitive data that most of them hold, and firms are well aware of what happens when they let their guard down.
“Despite all of this, I was really pleased to see the many positive messages coming out of the survey; not just around fee growth and cash management, but also around the recognition that staff focused strategies are key to sustainable growth.”
Tim Kidd, Chief Executive of ILFM, commented:
“The legal sector is notorious for its long hours. However, firms have to be willing to change and adapt to survive, particularly when it comes to changing working practices. Partners told us that their greatest challenge was in retaining high quality staff. Staff told us that their most important consideration when looking for a new job was work/life balance, with competitive salary only the second most important consideration. Clearly, those firms willing to adapt their practices to what employees are looking for will win out in the war for talent.”