Firms report strong financial performance and profit growth despite headwinds
Technology and innovation are driving profound change in Australia’s law firms, as such remained a key focus for the 2017-18 financial year, according to the “Mahlab Report 2018.”
The investment remained distinct from the execution of NewLaw strategies, which was less prevalent, as many firms have already adopted practices of competing businesses. Some firms have also partnered with NewLaw outfits.
“Firms are collaborating with NewLaw competitors to develop new, efficient ways to deliver legal services,” said Liza Gazis, managing director of Mahlab’s New South Wales office.
Law firms are expanding their service offerings like their accounting and finance industry peers. Innovation and operation roles in the legal industry also grew substantially in the last fiscal year, Mahlab said.
Firms are also increasingly using AI for better analytics, reporting of internal and client work, and performance of routine work that includes due diligence and contract reviews. Outsourcing also increased for specialists to focus on higher-value work and maintain higher levels of profitability.
Clients are now asking lawyers to provide more holistic advice, as technology changes client expectations. Use of alternative billing arrangements has also increased as clients demand more value from firms.
Firms are also seeing increased competition from the major accounting firms, which continue to push into legal services by leveraging their brand strength, client base, and innovative and multi-disciplinary services to take market share in the space.
What lawyers seek
Lawyers are looking for quality legal work, training and development, a career path, financial reward, recognition and a balanced lifestyle, Mahlab said. Flexibility has become a key factor in job satisfaction, as retention remains a critical issue for firms.
Lawyers reported working longer hours in the last fiscal year, which has resulted in junior-level lawyers leaving after only two years to look for better work-life balance.
This coupled with the skills shortage has driven some firms, particularly corporate and banking and finance practices, to increase pay to attract talent. Teams have also become smaller in 2018, Mahlab said.
The tight talent market has led firms to emphasise value propositions and diversity and flexibility policies.
In-house, overseas draw
More lawyers moved to in-house teams or moved outside Australia in fiscal year 2017-18 compared to the previous year, the report found.
Lawyers are also moving in-house or overseas earlier in their career. Lawyers said that in-house work is a more sustainable career choice in terms of demands, varied workloads, career paths, and work-life balance.
However, the senior-level market is not as fluid. Senior associates, special counsel, and partners without practices said that finding a new role in the market is difficult.
Solid financial performance
Despite headwinds and modest turnover growth, law firms reported strong financial performance, Mahlab found. Top-line and bottom-line growth were driven by innovation strategies, including collaboration, technology, outsourcing, mergers and acquisitions, and lateral recruitment.
Mahlab also found that the average national salary increase in major law firms was at around 2.5%, modestly above the 1.9% CPI. Lawyers with three to six years PQE experienced salary growth of 3% to 5%.
Standout lawyers grew their pay by up to 10%. Star performers in the senior associate level received bonuses of up to 20% of their base pay.
