The number one reason for this lack of ownership mentality is that “most lawyers aren’t raised to think of the practice of law as a business,” says Elaine Fitch, of Kalijarvi, Chuzi, Newman & Fitch. “They become lawyers because they want to be lawyers, not business owners.”

This in turn leads into the personality traits of the kind of people who select law as a career. Many lawyers become lawyers precisely because they do not see themselves as future business owners, but rather as practitioners of a craft. “Their personal commitment to their craft is what often allows them to be great at what they do,” notes Joshua Driskell of Lagerlof. “When stepping into an ownership role, they might often feel as though they have a less intimate connection to their practice.”

Another obstacle to developing an ownership mentality is lack of training. Most law schools do not include any education or training in the business of law, and that is unfortunate. “The consequences of the lack of this training often shows up down the road,” says Brian Temins of Minden Gross. “Making the transition to owner isn’t as easy as just changing a title — training and preparation need to go into it.”

Indeed, adds Bijal Vakil of Allen & Overy, having business acumen “is just as important for obtaining work and retaining it.”

“Most lawyers aren’t raised to think of the practice of law as a business. They become lawyers because they want to be lawyers, not business owners.”

Often firms are not intentional about exposing their lawyers to the business side of the firm. And this problem starts early because many law firms encourage young attorneys to focus on developing their legal skills, rather than on developing a book of business. As their practice builds, these lawyers tend to focus on getting their legal work done, and perhaps never develop and understanding of why they do what they do. Instruction on why the work matters to the client, and how lawyers’ time is billed and collected, as well as how new work comes to the firm, may broaden attorneys’ focus beyond the day-to-day legal work.

Another possibility to consider is that an attorney may, in fact, already have an ownership mentality, but the more senior attorneys are not allowing him or her to express that. If senior partners insist on doing things the way they have always been done, or are not welcoming toward new ideas, other partners will have little incentive or opportunity to demonstrate an ownership mentality.

What’s a firm to do?

Many law firm leaders that were interviewed emphasize “drawing back the curtain,” and involving more attorneys in the business of the firm. This approach requires transparency and education at all stages. Tom Segars of Ellis & Winters recommends starting early by “involving young lawyers at every step of the initial client intake and billing processes, including conflicts checking, initial consultations, discussing terms of engagement, preparing an engagement letter, and editing invoices.”

David Lackowitz of Moses Singer, agrees, saying that transparency means sharing information. “Just like in other industries, [the attorneys] should be provided with data about lawyer productivity, revenue, expenses, hiring and firing, strategy, goals, etc.,” says Lackowitz, adding that such information given to attorneys at the beginning of their careers is the first step in creating an ownership mentality.

Too often, however, firms keep financial information within a small, tight circle. In some larger firms, even seasoned partners may not have access to important financial information. Instead, firms should share as much information as possible to encourage ownership mentality among their lawyers. “When people understand the mechanics of the business and feel like they have skin in the game, they are more likely to work harder for [the firm] rather than just themselves,” observes Sean Dolan of Evans & Dixon. Information is power and can lead to open discussions and improvements to the overall firm.

Law firms should start this process early by involving associates in the client relationship. This simple commitment goes a long way towards instilling an ownership mentality. When associates see how clients use and value their work — including knowing that the client has paid the bill for the work — associates then feel a sense of ownership to the client relationship.

Involving associates in the entire project creates a sense of ownership, while simply assigning tasks insures they develop purely a task orientation, explains Mickey Maher of Hecht Solberg. “If a younger lawyer hasn’t experienced the opportunity to take ownership of matters or some piece of client relationships, the lawyer will be less likely to take ownership in the enterprise of the firm over the course of his or her career,” Maher adds.

Indeed, firms should take this one step further — let younger lawyers play significant roles in hearings, depositions, trials, and more, especially as they become more senior. Introduce them to clients and encourage clients to contact senior associates directly with questions.

Heather Linn Rosing of Klinedinst observes that “the things that law firms can do to instill an ownership mentality in those up for partnership are the same things that firms can do to promote retention.” These include fair compensation, wellness programming, a commitment to the community, and a mechanism for employees to express their opinions and participate in the betterment of the organization.

Many of the leaders interviewed also emphasized the importance of active mentorship by senior lawyers, as well as active sponsorship for attorneys, and especially for women and diverse attorneys.

Promoting teamwork

While it is often challenging to motivate lawyers to participate in activities beyond their normal billing hours, firm activities that promote bonding, teamwork, and cross-selling are valuable in reinforcing ownership mentality. Involving lawyers on firm committees, such as recruiting, can help to instill an ownership mentality within them, says Heidi Yernberg of Jayaram Law. This activity brings “[the] entire team into operational issues from the beginning, involving associates in a wide range of areas, from project management and workflow to reviewing bills and budgets, to fostering business development relationships, encouraging thought leadership and more,” Yernberg says, adding that group activities, no matter what they are, instill a connection and sense of responsibility to others in the firm.

Developing a strategic plan, with the input of all attorneys and staff, is a way to encourage involvement and ownership. The plan should be consulted and reviewed on a regular basis, so that all stakeholders can see how it is being utilized to determine the direction of the firm.

“When people understand the mechanics of the business and feel like they have skin in the game, they are more likely to work harder for [the firm] rather than just themselves.”

Indeed, Mary Vandenack of Vandenack Weaver encourages her lawyers to develop their own practice plan and “that plan should be incorporated into the firm plan.”

At Ellis & Winters, a North Carolina-based litigation and commercial real estate firm, they take it further by having their director of Client Services & Business Development work with each attorney to develop an individual plan for business development, focusing on the lawyer’s interests and strengths, while holding each lawyer accountable for implementation.

And finally, accountability is a large part of this process — and often, it is the hardest part of the equation as managing partners often have difficulty holding their partners accountable. “I would give them actual business responsibilities,” says Marco Antonio Gonçalves of Veirano Advogados in Brazil. “A make them accountable for [those] responsibilities, as well as for what is expected from them as a firm partner in the long run.”

To reinforce what it means to be a partner, Fairfax, Va.-based patent law firm Harrity & Harrity conducts partnership skills training that requires new partners to meet with the managing partner on a bi-weekly basis to review scenarios, such as hiring or firing an employee, or how to deal with a potential malpractice issue. When a partner has an ownership mentality, they hold themselves accountable because they want their firm to improve and succeed in every way possible.

Clearly, creating an ownership mentality among firm partners is not easy. Often, all a law firm can do is provide training, resources, opportunities, and support. It’s up to the individual lawyers and partners to fully embrace being a law firm owner and all that it encompasses.

While all of these reactions are normal, remember that critical feedback is not personal; it’s integral to business. It’s critical to our legal practices and the business of running a law firm that we are always learning, growing, and developing, especially if a particular behavior has a negative business impact. The key is to understand the situation objectively, try to resolve the issue, and then move forward. With shifts in the way we communicate, feedback can be a great gift to many senior-level attorneys.

Certainly, receiving difficult information can be a challenge. When you handle a negative situation graciously and calmly, however, your demeanor and professionalism will be noticed and appreciated. More importantly, you the gain the ability to pivot in the best direction possible for you and your organization.

Communications strategies

With that in mind, here four tips that may prove useful the next time you find yourself at the receiving end of constructive (and possibly uncomfortable) feedback.

1. Stay engaged in the conversation

It’s common to tune out feedback — and even mentally map out the counterargument before hearing someone out. That’s why many of us shut down or become closed off when presented with negative information. When this happens, we give off nonverbal cues through facial expressions and body language that show we’re not engaged in the conversation. Yet, this is a guaranteed way to rapidly escalate the conversation from constructive to destructive.

Because a conflict cannot be resolved until the situation is understood and addressed, it is important to stay open and actively listening. That way, you can be part of the solution and help everyone find a way to move forward. Keep your face neutral, your arms uncrossed, and your mind open.

2. Keep emotions out of it

Shock, anger, and embarrassment are all common reactions to bad news or criticism. In fact, many people may experience an entire range of emotions when presented with negative information at work. And while these reactions may be considered normal, unfortunately, they only serve to escalate an already negative situation.

By remaining calm and emotionally regulated, you can maintain a professional presence and offer solutions to help determine the next steps.

If you feel the conflict has arisen from misinformation, feel free to make that correction — but stick to the facts. Making excuses or placing blame will only cloud the issue and make it difficult to make headway. Further, it may seem like you aren’t taking responsibility but are instead throwing others “under the bus.”

3. Ask to reconvene

Not every conversation has to be resolved in a split second. Take a break and ask to reconvene once you’ve had a chance to review the details. Separating yourself from the situation will allow time to regulate your emotions, process the information, and start to come up with productive solutions or next steps. And if you have to share the bad news with others, taking time to review the situation can be even more important.

Your ability to remain emotionally regulated and handle feedback well will make it easier for your team or clients to model your behavior and provide a more straightforward path forward for everyone involved.

4. Look for the positive

As unpleasant as it may be, try to remember that constructive criticism, negative feedback, and difficult conversations are all key opportunities for growth. Each time you find yourself at the receiving end of bad news, try to see what you can gain from the situation.

For example, if the issue comes from a client, take time to listen and ask questions. The client may appreciate your openness to their feedback and your desire to improve. If you’ve hit a challenge within your firm’s partnership, having an open conversation will help you build trust and develop the relationship, as well as maintain a healthy work culture for others.

If your client is leaving you for a new firm, ask them why. If they’re committed to moving on, they still may be able to offer insight that will help improve your engagement with your other clients going forward. Being receptive to critical feedback will help establish you as a highly respected lawyer within your field, as well as one who is always trying to be responsive to their clients.

If the bad news comes internally, work together with your colleagues to see if they can share their suggestions on how they could have handled the situation differently. Use these scenarios to strengthen your relationships internally, possibly gaining information that may help you in the future.

Importantly, don’t be afraid to ask for constructive insights from both higher-ups and junior members of your team. Each perspective can contribute knowledge that helps create and refine best practices for your firm.

Responding with grace

When you respond to challenging feedback with grace and open communication, others will come to see you as a confident and emotionally intelligent person — one that they will be more likely to seek out in the future. You will also help create a psychologically safe work culture in which people aren’t afraid to give constructive feedback.

Remember that no one gets to the top without facing conflict multiple times throughout their career. What sets the best professionals and leaders apart is the way they handle these uncomfortable situations.

So, the next time you find yourself in a difficult position at work, remember to stay engaged and open to discussion, separate yourself and process your emotions, and accept feedback with grace and poise. These tips will help you navigate tricky situations confidently and allows you to continue growing and developing your key relationships internally and externally.

Receiving constructive feedback professionally and with grace is one step towards building communication and strengthening relationships among your colleagues and clients. For more on how internal collaboration can enhance your firm’s standing in clients’ eyes, check out our recent Thomson Reuters Institute Insights podcast.

As we enter 2023, the specter of a potential recession looms over all budgetary and strategic decisions. Professionals in corporate law and tax departments are already anticipating having to do more with less, which will likely impact how they work with their outside partners over the next 12 months. Add into this a mixture of new governmental regulations, and these next 12 months could start to look less optimistic and more of a trial to overcome.

In the most recent Thomson Reuters Institute Insights podcast, available on the Thomson Reuters Institute Insights podcast channel, our team of strategists reveal the trends they’re watching as we enter 2023, and how changes in the overall economy may affect this coming year’s strategic priorities.

Rabihah Butler, Head of Compliance & Government Insights, says that compliance is the name of the game in the risk and fraud space, with the Beneficial Ownership Act, the Enablers Act, crypto-regulation, and ESG compliance all playing their part to make the coming regulatory year a complicated one. And in the event of an economic downturn, there may be questions surrounding who bears the burden of that compliance risk, as well as how government entities and court systems will be able to continue key system reforms that they began during the pandemic.

Natalie Runyon, Head of ESG Insights & an Advisory Services Consultant, believes 2023 may be “a painful year because of multifaceted operational challenges and other headwinds” facing those responsible for ESG within organizations. The Securities and Exchange Commission’s rules on greenhouse gas emissions and the European Union’s new corporate sustainability reporting requirements both will increase work for lawyers and accountants, while certain social aspects of ESG — most significantly, the increased focus on employee well-being as a key performance indicator of organizational well-being — will remain a key priority for boards, especially in a tighter labor market.

Zach Warren, Head of Technology and Innovation Insights, views the tech and innovation landscape as one where next-generation technologies such as artificial intelligence, blockchain, and even ChatGPT may be taking a back seat to tried-and-true standards like business development and security and data protection. Thomson Reuters research has shown that while technology investment has continued thus far in the legal and tax industries alike, a recession may mean scaling back some research and development initiatives.

Bill Josten, Head of Legal Marketplace Innovation Insights, notes that what is top of mind for corporate law department leaders and law firms alike isn’t changing: the volume of matters they’re seeing is increasing. However, flat budgets and a potential down economy may have changed the calculus of how those matters will be tackled. Tighter budgets are forcing corporate law departments to tier their outside work, which could mean a potential rise in utilization of alternative legal services providers. Law firms, meanwhile, also are eyeing what inflation might mean for their realization rates and how to hold onto demand in the face of those tightening corporate purse strings.

Finally, Nadya Britton, Head of Tax and Accounting Insights, explains that small and midsize tax & accounting firms are looking to continue their advisory services expansion, particularly with continued industry automation and a de-emphasis on simple compliance work, while large tax firms are focusing on specialization in specific industry areas. Corporate tax departments, meanwhile, are “all about data, data, data,” Britton says, particularly with trying to better integrate the tax function into their organizations’ wider business initiatives. Even though any economic downtown may not impact tax as strongly as other industries, there are still implications around the industry’s growth plans to be considered.

As our team of strategists describe it in the podcast, 2023 is set to be a complicated year, but research has shown that there can be reason for optimism among all areas of professional services. Even with economic uncertainty looming on the horizon, the next year can prove fruitful with a little strategic planning and care.

Episode transcript.

You can get the whole story on the outlook for 2023 and listen to the most recent Thomson Reuters Institute Insights podcast here.

The Great Recession and its fallout saw the introduction of two relatively new concepts into the legal marketplace: the alternative fee arrangement (AFA) and the rise of in-house legal operations and procurement. Prior to the recession, the typical pricing arrangement between a client and a law firm was a relatively simple matter of the firm setting a rate, billing the client, and the client then paying the bill.

As clients increasingly turned to their legal operations and procurement teams to help drive down their own legal costs, the billing arrangements between clients and law firms became more complicated. Enter the age of the AFA, a plethora of pricing options encompassing capped, collared, and fixed fees, rebates, volume discounts, and much more.

While some law firms have had at least some members of their professional staff focused on pricing since long before the Great Recession, for many more, the idea of a dedicated pricing team has grown in importance in recent years.

In a few short years, the use of AFAs grew to nearly 20% of the average law firm’s revenues, and with the rise in revenue, so grew the need for experienced professionals to help shepherd these arrangements into being and thus ensure their success. A key part of that role quickly became having these professionals involved in direct negotiations on rates with highly trained procurement professionals on the other side of the table. In addition, law firm pricing professionals soon were responsible for other matters, such as the strategic navigation of tools like reverse auctions, which clients sought to use aggressively to contain their legal spend.

While some law firms have had at least some members of their professional staff focused on pricing since long before the Great Recession, for many more, the idea of a dedicated pricing team has grown in importance in recent years.

For many firms, this has resulted in fierce competition for experienced legal pricing talent to lead these critical pricing functions. Compensation has followed demand across the industry, from lead roles down to junior analysts.

The True Value Partnering Institute, in collaboration with its partners, Rees Morrison at Savvy Surveys for Lawyers, and the Thomson Reuters Institute, have tracked the progress of these pricing professional for many years. To that end, the group has published its latest report, Compensation for law firm pricing professionals at the start of 2023. Launched originally in 2017, this survey has charted the growth of legal pricing professionals, not only in terms of compensation but also team composition, as well as examining where the team fits into current firm structure, and how the team spends its time.

According to the most recent findings, compensation across pricing roles has risen notably. For example, in the last iteration of this survey, chief-level pricing officers were nearing $500,000 in total compensation; the most recent results show nearly every chief-level pricing officer exceeding this threshold. Even at the director level, some highly compensated directors were earning as much annually as their counterparts with chief-level titles.

For a more complete examination of the current state of compensation and job roles for legal pricing professionals, you can access the new report, Compensation for law firm pricing professionals at the start of 2023 here.

The findings also caution against falling into the trap of assuming that salary is reflective of experience or expertise. Drawing an analogy to lawyers, one would be mistaken to assume that a higher-paid lawyer at a larger firm always provides higher quality representation than a peer at an Am Law Second Hundred or Midsize law firm — the same holds true for law firm pricing professionals. In both cases, the successful outcome of a pricing arrangement is much more closely tied to the skill of the individual, and many skilled pricing professionals can be found outside the echelon of the largest law firms.

In that same vein, the number of years a professional has been with their current law firm was not found to be indicative of compensation. Indeed, it was more common to find higher compensation among professionals with shorter tenures at their current firms. However, this is likely a reflection of the highly competitive market for these professionals. More than 50% of respondents indicated that they’ve been with their current firm for fewer than five years with near 25% reporting a tenure of less than a year-and-a-half.

The market for experienced law firm pricing talent is, indeed, competitive, and the result, predictably, appears to be high mobility and commensurately competitive salaries.

Looking over the past year, three key themes — around client feedback, talent management, and law firm business development — strongly resonated in our columns and throughout the legal industry.

Leveraging client feedback

Learning what clients are thinking by way of formal client listening programs or feedback opportunities was an especially potent manner in which law firms sought to improve their client relationships and demonstrate their value to clients over the past year.

Whether gathering feedback at the client interview stage or in post-pitch discussions, receiving feedback from clients around what the firm and its lawyers did right or wrong, how the firm’s client service could improve, and even what competitors were doing it better may lead to some uncomfortable questions, but such client insight can prove extremely valuable to the firm’s performance going forward.

Further, a two-part series of columns on client listening programs showed how valuable those can be to a law firm’s own bottom line, detailing how clients spend twice as much with those law firms that ask them for formal feedback than with those that don’t. The series also discussed the typical barriers that exist to establishing client listening programs, most significantly, of course, trying to engage firm partners in the process.

Talent & retention

Not surprisingly, finding ways to keep key legal talent was quite possibly the top concern among law firms and other professional services firms throughout 2022 — and our Custom & Advisory columns certainly reflected that.

Indeed, it became clear as the year went on that legal talent had become extremely mobile, and many lawyers, especially younger associates, were switching law firms with increasing frequency in order to find a good fit that met their needs. Interestingly, while the legal industry initially thought throwing more money at these associates would solve their retention problems, it seemed there was much more at stake in the minds of these associates.

Numerous industry surveys showed that among associates, compensation ranked lower as a reason to stay at their current firm. Much more important in their minds was the firm’s culture and leadership, according to our research.

This meant that law firms needed to look for incentives beyond compensation to retain their top legal talent, such as improving how fairly associates are treated and how much they are shown respect by their current firms — both of which ranked very high on the list of reasons why an associate would choose to leave or stay at their current firm.

In our surveys, associates also noted that they are most likely to leave a firm if they perceive a lack of opportunities for career growth. This insight was extremely valuable to those law firms that were concerned about lawyer retention because it gave them one clear area to address by offering more career development, networking, mentoring, and training opportunities. In fact, all of these factors contributed greatly to an enhanced sense of well-being among lawyers, something too that law firms would be wise to promote in order to keep top talent from leaving the firm.

Business development strategy

As the legal industry (and the rest of the world) moved past the worst of the global pandemic throughout 2022, those law firms that embraced remote and hybrid working environments were now confronted with managing clients that had done the same, dramatically changing how lawyers and clients were interacting.

For example, during the pandemic and now going forward, it became clear that videoconferencing was far superior to phone calls with clients, allowing lawyers to better establish rapport more rapidly and greatly enhance the client relationship.

Another Custom & Advisory column picked up on the theme of improved client relationships by suggesting that a business development strategy that’s lodged in how the firm’s value is demonstrated to clients can be a way for firms to differentiate themselves from the competition. Clearly, all firms lay claim to having client-centric service, but only those that make that claim come to life by demonstrating at every touch point within the client experience will truly differentiate themselves, the column noted.

Like with many strong themes that emerged through our Custom & Advisory columns, embedding the demonstration of value within the client experience was not just a good-to-have mantra of today, but rather a necessary component for law firms if they were to continue forward successfully in the current environment.

Clearly, business development doesn’t just begin and end with finding additional ways to serve current clients. Law firms should be constantly on the look-out for new practice areas or service offerings that can help them add business from current clients and attract new ones. For example, the area of environmental, social & governance (ESG) has become a potentially lucrative vein of new business in compliance, corporate work, and risk management matters for those law firms that are early adopters.

As reflected in our Custom & Advisory columns published throughout 2022, the themes of client feedback, talent management, and business development greatly influence firm leaders’ focus over the past year. Moreover, these themes — and others that will be chronicles here — are likely to continue weighing on law firms leaders’ minds into the next year and beyond.

If you’re interested in learning more about some of the research used in our monthly Custom & Advisory column, and how this data can be applied to your firm, please visit here.

Conversely, lawyers and perhaps especially partners, tend to go it alone, opting instead to maintain tight control of client relationships and, often, the origination credits that come with them. Many would be quick to point out that most of these partners have built quite successful and lucrative practices, so has there really been any downside to their practice of cloistering client work?

In one sense, perhaps not. Lawyers, especially for the last couple of years, have enjoyed an incredibly profitable run at a time when financial success seemed far from assured for most businesses. A lack of meaningful collaboration doesn’t seem to have hurt go-it-alone partners.

However, research from the Thomson Reuters Institute shows that law firms and their lawyers that have not fostered environments conducive to true collaboration on behalf of their clients might, in fact, be leaving considerable money behind and may even be placing unneeded strain on their client relationships.

In the most recent Thomson Reuters Institute Insights podcast, available on the Thomson Reuters Institute Insights podcast channel, we are joined once again by Lizzy Duffy, a senior director with the Thomson Reuters Institute’s global client services team. Duffy shares with us some surprising findings around just how powerful a team of lawyers that the client feels operates in a truly collaborative fashion can be for the law firm.

For starters, our law firm of hypothetical go-it-alone partners captures, on average, about 14% of a client’s total legal spend, Duffy explains in the podcast. In sharp contrast, firms where clients are served by what they perceive to be collaborative teams of lawyers enjoy closer to a 56% share of the client’s spend.

Looked at in this light, the lost opportunity cost from failing to deliver collaborative legal services appears substantial.

This podcast also explores some basic questions such as, how exactly is collaboration defined for purposes of this research and in the client’s mind? The podcast also delves into more complex topics such as how firms can best foster a collaborative environment in an era of hybrid work, identify and overcoming impediments to more collaborative cultures, and more closely integrate clients into these newly formed collaborative workstreams.

As we discuss, it’s not an easy goal to achieve, and it can involve addressing thorny topics like attorney compensation. However, the payoff in terms of improved client service, increased client loyalty, and a potentially huge jump in share of wallet might just make the effort worthwhile, particularly in a market increasingly defined by mobile demand and clients looking for law firms that deliver truly excellent service.

Episode transcript. 

You can learn more about collaboration within law firms on the latest Thomson Reuters Institute podcast here.

Looking over the columns for the year, several key themes emerge, such as how firms can best move past the constrictions of the global pandemic and begin to address other challenges like evolving technology and the shifting world economy. Other columns offers firms pathways to improving firms’ practices, increasing efficiency, and becoming a true partner to their clients; while others offered key takeaways, gathered from top legal clients, on the overall legal market.

Thriving in a post-pandemic world

As 2022 began, it seem that the worst of the global pandemic was behind us and law firms and their corporate clients were moving toward what could be seen as a more normal, or at least traditional, way of doing business.

Several Insights in Action columns explored these developments, looking at how chief talent officers within law firms were dealing with the hot labor market, especially around issues such as securing associate retention and staying on track for return-to-office plans.

In fact, several best practices emerged as to how to better retain key talent, including: i) clearly defining how the lawyer’s role fits with the firm’s goals and what lawyers need to achieve to ensure their own progression; ii) offering lawyers more control and flexibility as to what, when, and how they work; and iii) supporting lawyers’ well-being, including offering training and health-related programs.

In fact, concerns over talent continued to resound within the legal industry (and elsewhere) throughout the year. As such, several columns addressed how firms can best utilize or leverage the resources they have to provide the kind of training, work/life balance, and employee well-being for which many lawyers and staff members were clamoring.

How to address key challenges

One column published in October detailed how law firms can best address the reasons that younger associates and others leave the firm they’re currently with to go elsewhere, either to another law firm or in-house to a corporate law department. While being provided with opportunities for career development and growth was cited by many lawyers as strongly related to the satisfaction they feel with their current firm, surprisingly, compensation was not cited as such a strong correlation.

Other concerns, such as being treated with fairness and respect; feeling confident in the firm’s overall strategy and in firm leadership; and having the support of higher-level colleagues, such as partners all were ranked as more important than compensation in lawyers’ decisions to either leave or stay at their current firms, the column noted.

And that is good news for law firms because addressing those concerns is much less costly than simply increasing compensation, even if it can be a bigger challenge. However, throughout the year Insights in Action didn’t shy away from the bigger challenges that law firms were facing and instead offered ways firms could best overcome these hurdles.

For example, a recent column described how offering clients quality legal services is no longer a differentiator that law firms can count on to separate themselves from their competition; rather, offering quality legal service has become an expectation on the part of clients.

That means, as Rachel Heathcote of Thomson Reuters Market Insights, pointed out, is that clients are looking for more from their outside law firms, and the data shows that such issues as responsiveness, expertise, and business-savvy all have increased as firm differentiators in the minds of clients.

“What it shows to me is that everybody is doing service really well, so nobody is standing out for their service — it’s not a differentiator, it’s just table stakes,” Heathcote explains. “So what we have to be careful about if you’re a law firm is that if you are delivering poor service, then there’s a danger of losing out to competitors that are delivering high service.”

Again, the data shows that clients may be seeking more active business value out of their law firm engagements rather than simply a good client service relationship, she adds.

What the legal market revealed in 2022

One of the key values of the Insights in Action columns were their take on the legal market overall and the insights law firms could gain from the market data and client surveys.

For example, one mid-year column addresses the seeming disconnect between clients and those lawyers they designate as a stand-out performer as to where they see the value in their relationship. The column expanded on a survey that had queried clients on what qualities in those stand-out lawyers makes them truly stand out; and, querying the stand-out lawyers themselves, on what they think clients value in them.

While clients rated lawyers’ expertise and technical acumen as top qualities, the lawyers themselves cited their service and close relationship with the clients as their top draws. Clearly, as the column noted, there is room here for law firms to shore up what their lawyers can offer by focusing on what clients are saying is most valuable to them.

Other columns explored other critical subjects, such as how clients are exhibiting growing optimism about their future legal spending, despite the current economic pessimism; and how law firms based in the United States have managed to gain market share in the United Kingdom’s legal marketplace.

Looking ahead to 2023 and beyond, the Thomson Reuters Institute’s Insights in Action column will continue to offer data-driven analysis and market-revealing insights that can greatly help law firms navigate the often-choppy waters of the global legal market.

If you’re interested in learning more about some of the research used in our monthly Insights in Action column, and how this data can be applied to your firm, please visit here.

Just a few months later, this prognostication could be closer to reality than originally thought, given the rate at which law firms and professional services firms are fielding inquiries from existing and potential clients and having to add resources and personnel to handle it all.

For example, Eversheds Sutherland’s ESG practice went from a handful of lawyers to more than 200 attorneys in just two years, according to Herbert Short, co-lead of the firm’s global ESG team. “Our management saw ESG as a critical area for our clients and put a leadership team in place when we got serious two years ago,” Short says.

Since then, the firm has created a cross-regional team of 25 senior lawyers, including heads of sector groups and managing partners of geographic practices who are dedicated to assisting clients with ESG strategy. The team re-visits the practice group strategy regularly to remain in tune to clients’ needs across the globe, Short adds, and uses real-time client feedback to shape the practice area’s strategy going forward.

An expansion in the breadth of ESG

Interestingly, those law firms with existing expertise around clean energy, employment contracts, and board governance have elements of an ESG practice, even if those efforts aren’t overtly pitched as such. Within these areas, however, corporation clients — because of pressure from investors, shareholders, and regulators — are asking more detailed questions around emerging ESG-related operational and financial risks, explains Short.

Some areas of clients interest in ESG activities include:

Leadership and governance — Board compensation and composition as well as the scope and structure of the audit committee examining such issues as executive pay, are big areas of focus for many corporations that are seeking to improve their ESG bona fides. Similarly, designating a board member to oversee how ESG requirements and regulations are evolving is a necessity for boards’ governance activities, especially because of litigation risk.

Jessica Lu, a litigator at Brown Rudnick, says the primary driver of this new trend is the divergence between what a company signals its values to be and its implementation of those values. Too large of a gap in this area can carry a lot of risk, ranging from reputational harm to serious regulatory trouble. “We’re seeing corporate ESG disclosures giving rise to costly securities litigation with corporations being sued for securities fraud based on overstating or misstating their ESG commitments and shareholder litigation against officers and directors for failing to ensure diverse candidates for board seats,” Lu says.

Decarbonization — This area — which involves carbon offsetting and clean energy commitments such as in wind, solar, battery, and hydrogen sources of green energy — is quickly becoming a client focus. Many corporations are engaging in green-power purchase agreements, which grant clients’ access to renewable energy and minimize their carbon footprint for a fixed cost.

Another area of growth, according to Short, is carbon credits, in which companies purchase these credits as a mechanism to reduce their greenhouse gas emissions. Marketplaces exist to trade these credits, which are based on a value of carbon sequestration of forestry land and allow small and large landowners to monetize the carbon-capture of their land.

Supply chain management — In addition to demanding transparency into global corporations’ ESG activities, investors and regulators are seeking the same in corporations’ vendors and supply chain. Corporate clients need to be aware of this heightened scrutiny, says Honieh Udenka, at litigator at Brown Rudnick. “We advise clients to start thinking about investments and due diligence in supply chain monitoring and tracing to mitigate risks that can arise down the supply chain,” Udenka explains.

Protecting human rights among workers is a central social issue — the S in ESG — for companies that contract with suppliers based in other countries to produce their products and serve their customers. To that end, multinational companies need to update their vendor and supplier contracts with clauses to meet new data reporting and verification requirements around workers’ protections in order to better reduce reputational risk, says Short, adding that companies also need to utilize appropriate international arbitration clauses to resolve cross-border disputes involving labor.

Data protection — Cybersecurity, data privacy, and other data and information concerns are another ESG pillar that’s become top of mind for clients seeking legal guidance. In a recent survey, cybersecurity was ranked as the second most-cited ESG concern among investors. Complexity in managing the data privacy of consumer information and data governance issues for companies all fall within the G of ESG and continue being seen as an increased areas of risk.

Sustainable finance — Sustainable finance, which include lending, debt, capital markets, green bonds, social bonds, sustainability bonds, and sustainability-linked bonds, is a growth vector for many law firms. Disclosure of ESG-related financial and operational risks is another economic engine among firms’ ESG practices, especially because of the expected finalization of the Securities and Exchange Commission’s rules around Scope 1, 2, and 3 greenhouse gas emissions.

Congruence between talk and action

Corporate clients are demanding that their legal service providers act responsibly through the alignment between the ESG guidance they offer to clients and law firms’ own internal commitment to ESG. It takes proactive action to make this alignment work.

Eversheds Sutherland, for example, is accredited by the Good Business Charter in the UK and validates its own emissions-reduction targets through the science-based targets initiative. At Brown Rudnick, Mark Grider, chair of the firm’s Crisis Management Litigation & Government Response group leads many elements of the firm’s ESG practice and uses that role to center the firm’s values into the core of its business and culture. In fact, Grider’s first-step advice to clients often involves a re-evaluation of their current corporate policies, procedures, and practices through the lens of their values.

Within the firm, this values-derived perspective allows Grider to help mentor up-and-coming lawyers like Lu and Udenka to ensure he is leading with authenticity, forging genuine relationships with clients, and living the firm’s ESG commitment at the same time.

Walking the talk as a responsible business starts at the top. Managing partners of law firms and practice leaders are best positioned to ensure their law firms’ purpose, core values, and internal practices are aligned to their public declarations of ESG initiatives and responsible action.

Complicating matters, associates are learning, observing, and practicing their skills in remote, in-person, and hybrid workplaces, so more support than ever is needed. Leaving BD skills to organically develop or providing a few sessions to inspire BD, likely won’t be enough to effectively or fully tap the potential of your firm’s associates to build and sustain thriving practices.

For law firms that want to offer more than aspirational platitudes, here are three strategies firms can undertake to better set up their associates for BD success:

1. Revisit learning & development (L&D) programs

Business development skills are akin to training for a marathon — you don’t run 26 miles without training on shorter distances beforehand. Similarly, law firms should be offering stage-specific learning & development training in business development from day one that should include normalizing BD training as early as possible. Even if associates aren’t expected to generate clients until much later in their careers, gradual introduction of BD concepts, service skills, and communication& interpersonal skills will allow associates to learn, practice, and work on these skills internally before turning their attention outward.

Firms should also build BD elements into non-BD sessions, which helps draw connections to the business of the firm and allows more voices to be heard. During a training session on mergers & acquisitions, for example, the presenter should share specific examples of how these transactions come to the firm, the key relationship aspects, and what factors aside from the legal work are important to clients.

It’s important for firms to use examples and stories in this way to bring the nuances of BD to life, while ensuring diverse perspectives (because BD isn’t a one-size-fits-all approach). Encourage associates to be creative and connect in ways that are authentic to them.

Other L&D methods include:

• • • emphasizing the small, consistent, daily BD skills. One-off grandiose efforts rarely win the race.
    • dispelling the extroversion bias. BD isn’t solely the domain of extroverts — in fact, some would suggest that introverts are often more successful with BD.
    • discussing what BD success looks like in all work environments and recognizing that just because some activities benefit from in-person interaction, doesn’t mean ignoring how BD can be done remotely.

2. Invest in firm systems beyond L&D

L&D programs aren’t the only source of support firms can offer. By using existing mentorship and sponsorship programs, firms can empower mentors and sponsors to strategize with associates on BD skills, provide access to networks, and guidance on approaches. This will help decode the unwritten rules around BD efforts that are most valued by the firm, as well as how these efforts are to be undertaken.

Mentors and sponsors should discuss how to build visibility, credibility, brand, and relationships in both remote and in-person settings. Indeed, sharing, strategizing, and supporting BD skill development is not always achieved through formal programs, unfortunately, and rather is often passed through informal channels. Firms need to be alert to this reality and encourage partners to pay closer attention to who benefits from informal mentorships and sponsorships and who doesn’t.

Too often, affinity bias plays a role in sharing critical development feedback and BD advice. Firm leaders should encourage a broader culture of BD sharing by all partners, For example, the fimr should encourage lawyers to schedule five-minute BD chats after meetings to review the relationship and BD aspects or opportunities with associates.

Mentors and sponsors should also be alert to the BD value of all firm and client opportunities and help advocate for their mentees and protégés. Access is just as important as skill development.

3. Build BD into formal and informal performance and career development conversations

Firms need to be explicit with associates about the expectation to do great work and to develop the foundational BD skills starting now. And this should include nurturing relationships, seizing stretch opportunities, attending networking events, developing client service skills, and more.

Telling junior associates to focus only on doing great work may disproportionately disadvantage marginalized groups. Those with access to networks and mentors will be investing in their relationships and BD skills, and those who didn’t know the unwritten rules and took the firm at its word will look up years later only to discover they’re behind their peers.

Firms need to build BD conversations into all performance and career development conversations while providing transparency and clarity around expectations. Help associates think about their unique strengths and how those might serve BD purposes. Development conversations should focus on actionable advice and hold people accountable for following up.

Firms should remember that remote environments may require more intention and structure — such as regularly scheduled meetings, for example — because there may be less opportunity for serendipitous interactions and informal run-ins with higher-level colleagues.

BD skills for associates should be fostered, developed, and supported from day one. As the legal industry adjusts to remote and hybrid environments, it’s a perfect time for law firms to revisit their BD skills training as well as explore how other firm systems can support associates.

Early, frequent, and intentional BD support has the added benefit of helping associates feel connected to the interests and goals of the firm, which could have associates feeling the firm is more fully invested in them and is seeing them  for their strengths and skills — all of which results in a deeper sense of job satisfaction.

To understand this movement further, Thomson Reuters Institute’s recent Insights Council meeting brought together 14 managing partners of large law firms from the United States, Canada, Latin America, the United Kingdom, and mainland Europe with several ESG experts from corporations and market exchanges. These discussions allowed participants to see how firms can better serve their clients on critical ESG matters, as well as progressively lead their own firms to meet ESG objectives.

The clients

Whether individual outside lawyers see ESG as in-fashion for the moment, or critical pillars on which they can build the foundations of their businesses, it is clear the client focus and commitment to these matters is palpable, and in many cases, substantial. Most clients have always needed to attract investors, and while that exercise hasn’t changed, the requirements of many of those outside investors now include ESG initiatives, making this front-of-mind for the law firms that serve them.

The panel presenting to the Insights Council demonstrated how ESG has become a critical part of the investor story, with high-growth companies nearing their IPOs, asset managers, and consumer packaged goods companies leading the way. While these entities are further along the maturity curve, there is a clear focus beyond those companies as well, with ESG key performance indicators, executive compensation ESG measures, and proposed regulatory disclosure requirements from the Securities and Exchange Commission (SEC) all looming over any portion of the market that’s not keeping apprised of the quickly evolving space.

When viewing ESG adoption globally, Europe has led the way with restrictions and regulations being enacted sooner, leaving a breadcrumb trail for US regulators and companies to now follow. Along those lines stateside, there has been an uptick in Public Benefits Corporations (PBCs) being formed, which moves from a shareholder-first approach to stakeholder-first (suppliers, investment groups, employees) and public-first focus. Many of the venture capitalists and major investors now have ESG-related requirements as well, such as net-zero emission targets for their portfolio, which make PBCs particularly attractive investments.

There is a fair amount of movement expected from a regulatory standpoint in the US of which law firm clients will also be keeping abreast, such as the creation of the International Sustainability Standards Board (ISSB). The ISSB’s first major action will be a forthcoming report early next year that will lay out baselines for sustainability disclosure standards, advice that the SEC is expected to adopt. Additionally, a close eye should be kept on the Generally Accepted Accounting Principles (GAAP) and the major accounting firms in the months and years ahead as they begin to more clearly define ESG and associated standard practices, which is sure to bring further regulatory measures.

The law firms

Today’s large law firms have embraced ESG to varying degrees. Most have a full appreciation for the significant impact it will have on nearly all clients and the opportunities that come along with that. However, they also admit to facing challenges on such a broad subject, making ESG particularly tricky to navigate from a leadership standpoint. The regulatory trajectory that is expected, however, makes these paramount issues for firms to accept, address, and, with proper strategy and execution, thrive on.

The first question many will ask is can we make ESG work profitable? It probably comes as little surprise that any billings at law firms around ESG today are few, with only a handful of “ESG Experts” even at the largest firms — but that doesn’t mean that others have not beaten them to market. The Big 4 consulting and auditing firms, for example, are already providing services on environmental and governance issues, particularly around supply chain and auditing. And with social issues, there are public relations firms that are beginning to emerge as players in the space.

Regardless of these advances, there is likely much opportunity ahead with which law firms can get involved and become serious forces. For example, the importance of energy and the legal implications of the green transition provides a clear space upon which firms can focus.

The main impetus to find profitable work around ESG is of course to drive firm growth, but it also ensures lawyer buy-in, something that doesn’t always come easy for ESG. In the drive to achieve billable hour goals, the incentive structures of most firms would draw attention away from ESG, not to it, offering a challenge for leadership and a major reason why things aren’t progressing faster in firms. To cover that attention gap, many firms have set out plans to educate their lawyers, with some even mandating that every member of their firm be fluent in ESG principles and kept abreast of developments in the space.

Perhaps the biggest barrier for firms is to be able to focus on ESG because it is extremely broad and encompassing. Should ESG progress to a regulatory and business level, it is tough to think of any aspect of life or a company’s operations that will not be affected by it, either directly or indirectly. Yet, boiling ESG down to its basic components can also help provide greater clarity for firm strategy, gaining wider acceptance across the firm and provide a rallying point that more lawyers may support.

What should firms do next?

Firms should try to be an early adopter. Those firms now positioning themselves to be a leader in the space will undoubtedly set the pace for the market and be tough to slow down once started.

Indeed, firms need to be led with clarity around ESG that can be easily understood and accepted by lawyers. Those lawyers, in turn, need to develop a clear value proposition around how their respective practice connects to ESG so that they can more closely align with clients and nimbly identify related business development opportunities. These things are not turns of the speedboat, rather they are turns of an oil tanker, and they will take time. However, there is a large incentive for firms to succeed: By instilling ESG principles in their own firm, firm leaders can bolster existing practices, develop new practices, and potential class actions. They also can better navigate the pitfalls, such as responding to geo-political challenges, addressing carbon emissions via air travel, and managing clients with a poor pollution or human rights record, to name a few.

The Insights Council meeting allowed participants the opportunity to learn about new challenges and opportunities that are clearly afoot in the legal industry as the implications of ESG unfold in the months and years ahead. More importantly, they could see how firms may be able to capitalize on this development for themselves and for their clients.

You can learn how to help your firm better determine its strategy by having a deeper conversation on ESG, here.