Law firm profit margins are at the forefront of all those responsible for running a successful law firm. If you haven’t listened to the Lawyers Weekly podcast on how law fared during covid 19 compared to other sectors, it’s worth doing. Host Jerome Doraisamy speaks to Matthew Bolle, Macquarie Business Banking’s National Segment Head for Legal, to discuss the findings and key takeaways from the 2022 Business Barometer report. Part of the conversation explores the scale to which law firms invested in technology since the pandemic and how “profit margins are being eroded by increasing costs of talent”. This blog is going to explore this further and look at the cost of not investing in technology, specifically when it comes to talent acquisition.
A Candidate’s Market impacts law firm profit margins.
When it comes to talent acquisition right now, it’s a candidate’s market (and we are just living in it – cue James Brown). In the fight for talent, some firms were forced to increase salary bandings or pay significant sign on bonuses. If coupled with an agency fee as well, hiring just one lawyer can cost a firm tens of thousands of dollars – a decent hit to their profit margin (without even factoring in the onboarding / training costs). Investing in technology to identify and connect with future talent directly and build relationships early (i.e. before the need to hire), empowers firms to front foot these costs and protect their profit margins.
Staff Burnout
Covid 19 was a catalyst for firms to invest in technology, not just to better service clients, but to address the “increasingly important issue of employee experience”. A silver lining of the pandemic was law firms placing a “heightened focus on employee’s wellbeing”. Currently, the time it takes to fill a live role will likely result in increased workload, and potential added stress, for existing employees. The result of this? Burnout, further exasperating staffing woes. Reduced staff equals reduced ability to efficiently service current clients (let alone attract new ones). Creating a future talent pipeline means less lead in time to fill a role and less chance of burning out existing staff, future proofing firm profit margins.
Competitive Edge needed to grow law firm profit margins
Traditionally “base salary, reward & recognition and workplace culture” were held in the highest regard when it came to employee value propositions. In the current market, “they are base line requirements”. Areas of potential differentiation are in “wellbeing programs, inclusivity, and technology“. Firms need to stand out in these areas to attract (and retain) staff. Controversial opinion alert: it’s time to move on from stagnant excel spreadsheets when it comes to talent acquisition. To create dynamic talent market maps or manage and utilise employee referrals, firms need a platform that is intuitive, legal specific and up to date in order to remain competitive.
It’s clear that technology has a significant impact on law firm profit margins, especially over the last couple of years; “technology (has) become an “always on” element of the vast majority of high performing legal firms”. The firms slow to invest in tech, may be overlooked and / or significantly out of pocket when it comes to talent acquisition. Insource is recruitment technology that gives law firms and in-house legal teams control of their recruitment. Insource is a searchable database that law firms and in-house legal teams can use to fill live vacancies, build future talent pipelines, and get up to date insights into the movement and composition of the complete talent community. Insource contains all lawyers that hold an Australian or New Zealand practising certificate and all registered legal executives.
Find out how Insource can help improve your law firm profit margins. Get in touch and book in a demo.
