Are European Mid-Market Firms 'Sleep Walking' to Disaster?
Within the next 5 to 10 years, mid-value legal work will have disappeared in all major legal markets fundamentally altering the shape of each. Mid-market European firms in particular are at greatest risk and potentially less aware of the impending threats. For the majority, the implications of this shift for their own domestic markets have yet to crystallise. However, these will be profound and irreversible.
International Offices and Profitability
The profitability of offices outside a firm's home market has become a major source of concern for law firm leaders. Whilst the issue has been acknowledged for some time, its magnitude has only more recently become apparent to many and the need for effective profit management amplified. As competition continues to intensify in law firms' home markets and others in which they seek to compete, this issue will come into sharper focus.
Arden Partners and Hodgart Associates Joint MDP Report: The Solution for Middle Market Professional Services
MDP Report: The Solution for Middle Market Professional Services
External funding is transforming the way in which key segments of the professional services sector operate. Market fragmentation, demand-side pressure from clients, technology as a catalyst for greater work process standardisation, and under-investment are attracting new sources of investment. The emergence of ABSs and other sources of deregulation are further altering the competitive landscape. Legal and accountancy firms should rethink how services are bundled for the B2B and B2C markets and consider the organisational and capital structures that are available.
The Numbers That Really Matter
In this second article of a series on how to assess the financial performance of law firms, from a management rather than an accountant’s viewpoint, we discuss how to manage profit per equity partner (PEP) indirectly through other variables to drive more competitive profitability.
We argue why PEP is the consequence of the interaction of these variables and we explore how increasing the cost multiple and revenue per fee earner (RPFE) rather than containing operational costs are two of the principal means of increasing profit per fee earner (PPFE).
This requires a different approach from the management team, different behaviours from partners and different management reporting to connect the two.
Some Immediate Issues for the UK Legal Market
As the dust begins to settle from the seismic aftershocks of the recent referendum result, some of the key issues it raises in relation to the UK legal market are a little clearer although their impact is still very uncertain. We did not want to issue something based on a ‘knee jerk’ response and will issue a more thoughtful paper shortly. This note is intended as an interim commentary.
Understanding Profit Margins
In this series of articles we focus on how to assess the financial performance of law firms, from a management rather than an accountant’s viewpoint. There are many (maybe even most) lawyers who claim to not understand the financial reports they are given by their finance team and there are some grounds for that given many of the monthly and other financial reports that abound in law firms.
There are also some very real and worrying misunderstandings about what is important data and what is subsidiary data as well as serious misunderstandings when comparing data between business units inside a firm and between firms. (We deal with the latter issue in this first article).
Partner Remuneration in Law Firms
Partner remuneration has become a much discussed topic in recent years, primarily due to the continuing competitive pressure on firms and the consequent pressure on partners to achieve ever higher levels of performance. Most law firms have responded or are responding by modifying their remuneration systems to reward higher performers or accommodate a wider range of performance. Why then would a leading European law firm’s decision to revert to pure lock-step be a cause for celebration when most others appear to be moving in the opposite direction?