EVERY year I’m asked what I think will be the main challenges for law firms in the 12 months ahead. Generally speaking, every year for law firms – and for most professional services firms – is challenging.
Client requirements change, legislation and regulation changes, political factors shift and the myriad other strands of influence bend and flex all the time.
Each year brings its own surprises, so my view is always this: every business has to make its own success. As soon as you start relying on the market to look after you, you’re in trouble.
That’s been particularly true over the last few years, but even now, at a time when it appears – for the most part at least – that the economy is on a slightly more even keel, there remains uncertainty for many.
Forward-looking and commercial managers are the biggest success factor in any firm. If a firm is well-managed, has a clear idea of where it’s going and understands the strategy which will help it get there, it stands a reasonable chance of succeeding. Without the business fundamentals, and a presence in the right parts of the market, the likelihood of success is very slim.
Scotland’s legal firms are spread right across this spectrum, and the gap continues to widen between those making serious progress and those not doing so well. We have already seen long-established names disappear from the Scottish legal landscape, succumbing variously to administration and acquisition. That’s perhaps to be expected in such a mature market, and one which has had to adapt extremely quickly to a financial services sector which has changed beyond recognition in just a few years.
For all of these reasons, I’d expect consolidation to continue indefinitely, and certainly throughout this year.
The market remains tough, and very competitive, accentuated by what I believe will be an unremarkable year for the economy as a whole. While I don’t expect it to go into reverse, nor do I think will we see a sudden and marked increase in growth. Combined, this creates a situation where firms will have to adapt, evolve and stay nimble if they are to achieve long-term, sustainable growth.
Of course, that’s nothing especially new. If you don’t seek progress and work in a way which encourages innovation, then you’re staying still, and inertia is a dead-cert route to decay.
But that kind of proactivity requires a degree of certainty; something which underpins all confident businesses. Certainty is one of the major factors behind a strong and growing economy, and the uncertainty around taxation, among other things, makes things a little more difficult in Scotland at the moment.
Confidence is all, and within that is the confidence of knowing the structure of your taxation and other areas, otherwise people can feel a little nervous about investment. It will be interesting to see how things pan out in 2015, but whatever happens, much depends on the extent to which you can make your own success.
People are an absolutely critical part of ensuring your business has the capability to grow, subject to the same caveats around confidence. If the environment inspires confidence, businesses will be more inclined to hire.
Everyone talks about people being their best asset, but that’s not universally true. It’s more accurate to say the right people are your best asset – the wrong people can be an obstacle at best, and ruinous at worst.
There’s a reason ‘talent’ has sprung up as a buzzword in recent years; it’s a good expression of what the best businesses work extremely hard to attract and retain. Within that, the top performers are those who can be transformative for a business – the ones who will graft come what may, who possess natural aptitude and technical excellence, and who have the ability to respond instinctively to client requirements.
But there’s only so much of that top-level talent to go around. This year, with the looming general election, the prospect of an EU exit, geopolitical turmoil around the world, and the slump in the oil price, there will be no abatement in the scale or intensity of challenges faced by clients of law firms.
That means law firms have to respond accordingly. The right people and proper management are the elements which combine to engender success in almost any circumstance, and like many things, it’s an equation which sounds simple enough. For some, though, turning those two elements into a workable business will prove too much of a challenge.
• Malcolm McPherson is senior partner, HBJ Gateley.