Rethinking the Law Office to Boost Profitability: Addressing Evolving User Expectations

by | 19 December 2016

In Part One of this series of posts, we examined the ways that some law firms are using workplace design strategies to help transform the office from a cost of doing business to an actual profit enabler. In Part Two, we will look at how law firms are updating their workplace strategies to accommodate the evolution of user expectations.

Economic factors are forcing change

It’s getting harder to make a buck these days in the legal world, though certainly some firms are doing better than others. On average, here’s what the numbers show:

  • Revenue growth for law firms in 2016 (through Q3) as compared to 2015 has been modest at best: barely over 2 percent.
  • Revenue growth per lawyer in that same time period is just slightly over 1 percent.
  • Profits per equity partner are either flat or down depending on the segment.
  • Demand growth has actually shrunk—from approximately 4 percent in 2006 to negative 2 percent as of Q3 2016.
  • Expense growth over the past year is fairly modest—about 3 percent—but nevertheless it is growing, and office space represents about 8 percent of overhead expenses.

Cost reduction strategies: The times, they are a-changin’

Financially successful law firms have adopted many operational changes to reduce costs and boost profitability, including:

  • Outsourcing activities such as non-legal research
  • Optimizing technology to improve the efficient use of lawyers’ time
  • Proactively engaging clients in discussing Alternative Fee Arrangements (AFAs) that are as profitable as hourly-fee projects
  • Proactive client-matter staffing involving both legal and non-legal staff

Many firms—including 32 percent of the top 200 U.S. law firms—are reducing their footprints or rearranging their existing spaces to reduce costs. Such activities include:

  • Reworking office configurations by going to standard- or universal-sized offices and/or shared offices
  • Digitizing the law library and using that space for associates’ offices
  • Shifting support services such as accounting, HR and IT to lower-cost locales

Pursue a concept of office space that actually makes money for the firm

Cost-reduction measures can have a positive effect on profitability, but cost reduction alone can only do so much. Our research findings lead us to believe that a significant opportunity lies in transforming the law office into an environment that enhances the ability of the firm’s revenue generators to do their jobs more effectively and more enjoyably, which in turn can boost profitability.

So how can you refine the business objectives of your law office space? Consider what you can do to:

  • Provide a place where people can conduct business to the best of their abilities.
  • Satisfy the expectations of clients who are looking to enhance their relationships with the firm and its lawyers.
  • Satisfy the expectations of the people the firm recruits, hires and wants to retain—particularly millennials. These are the people who will make money for the firm now and for years to come, provided they’re given an environment that supports collaboration, teamwork, transparency and other important values.

Stay tuned for Part Three of our series, in which we’ll discuss how firms are rethinking the law office design paradigm for a new breed of lawyer.

Also: Read Part One | Read Part Three

As president of National Office Services for Colliers, Cynthia Foster leads our national office platform across multiple service lines, including capital markets, tenant representation, leasing agency, property management and valuation.