COVID-19 Accelerates a New Business World That Was Already Underway
For traditional business models, a day of reckoning has arrived with the COVID-19 pandemic. Thrust into remote work and starved of revenue, businesses are suffering in the new normal. The professional services model adopted by law, consulting and accounting firms is particularly at risk for huge upheaval and disruption in a post-COVID business climate.
Some sectors have had their disruption already. Apple turned the humble phone into a camera, an interactive map and a motion-sensitive video game device. The telecoms sector has replaced copper cables with fiber optics, and ‘fintech’ is a ubiquitous term for financial services that have been revolutionized by technology.
But for other sectors, the revolution has not happened yet. The legal sector is a prime example and is a stickler for tradition. Paul Cravath led the most recent mass innovation in law firm practice, as recent as 120 years ago. Today, even the most sophisticated firms continue to use paper billing, filling rooms with “bankers’ boxes” (cardboard boxes for case files) and keep multiple personnel on hand to maintain them.
Any company with extensive commercial property interests now faces a workforce that has experienced the positives of remote work. Do they now want to endure a sweaty commute—sometimes inches away from potentially infected fellow commuters and then coworkers? Those companies that pride themselves on shiny offices, tall buildings, expensive art, large marketing and recruitment budgets face an even bigger financial wake-up call.
In a post-COVID-19 global economy, all such companies, and others, will have to radically transform work practices to emerge unscathed, or to even emerge at all. The notion of remote work practices only being found in a business continuity strategy document, designed for short power outages or an IT interruption, is now obsolete.
In professional services specifically, the new economy will demand remote, efficient, low cost execution and productivity that exceed pre-crisis services. Couple this with a remote workforce, influenced by millennials that will demand transparency, flexibility, financial stability and more autonomy.
The challenge is how to maintain productivity without proper plans to ensure continuity of workflow, maintenance of schedules and the efficient delivery of client service.
A remote strategy must solve the technology gap. Firms that rely heavily on paper are scrambling to find laptops. Sourcing laptops is a visible iceberg. More ominously, many firms lack crucial infrastructure to safely and securely handle sensitive information flow among hundreds and thousands of remote computers. Connectivity is proving to be a challenge for brick-and-mortar-housed technology. The solution is a semi-autonomous, peer-to-peer structure without centralized offices and fixed costs that drain profitability.
Not only do professional service firms struggle with remote work, they struggle with overhead. Rent is due. College graduates demand top pay, and senior executives often rely on a level of concierge service. Burdensome overhead is draining the very liquidity firms now desperately need.
Many firms were already overextended and debt rich. And now, their clients are racing to cut costs. During downturns, clients search harder for value. They seldom find it in the old school approach that can typify professional services firms.
In law, another cost burden is unproven attorneys commanding six figure salaries. Clients will no longer tolerate high billable hours to fund those salaries and the time more senior lawyers take to review and correct rookie mistakes. Legal training should go the way of medical training. The added benefit will be to eliminate the old model’s inherent conflict where lawyers are pressured with annual billable quotas to pay for these inefficiencies.
With greater autonomy and responsibility comes financial accountability and freedom. Next generation professional service firms will utilize technology to connect and to compensate. A formula-based, objective model aligns compensation with productivity, revenue and staff costs, creating a new equilibrium. It also reduces costs associated with managing remote workforce productivity.
Firms that adapt to this new economic reality will excel regardless of the economic climate. Lower overhead and efficiencies will lead to lower billable rates and perhaps greater rewards for senior executives. Meanwhile, many traditional firms will take half-measures and lose clients and senior talent.
The chill winds of efficiency and new work practices were already forming, but COVID-19 has accelerated the process tenfold. The world is changing faster than some can keep up. Many will go under before the crisis is over, and survivors will be weakened if they fail to adapt to the new reality.
Like Amazon, Netflix and Zoom, law firms can adapt. We did it in the face of a major economic slowdown. Our law firm, FisherBroyles, was born in reaction to the 2002 dot-com recession, and we have been revolutionizing the antiquated “big law” business model since that time. With 260 partners, we are now the largest distributed law firm in the world.
Remote work is at the core of our Law Firm 2.0® model and has been for over 18 years. Our lawyers are paid using a non-discretionary, non-biased compensation model. They work directly with clients to manage their fees and workflow, supported by staff trained to work remotely. We dispensed with prime real estate and the inefficiency of charging clients for associates-in-training.
Visionary companies are not reactionary. They are forward-thinking, looking for innovation and pivoting before crisis arrives. COVID-19 is a moment that will forever change the world as we know it. But it is not too late for others. Those businesses who have the will and courage to change can also thrive.
James Fisher and Kevin Broyles are the founding partners of FisherBroyles, the first and largest distributed law firm in the world, founded in 2002 in reaction to the 2002 dot-com recession.