Canadian Lawyer

w w w . c a n a d i a n l a w y e r m a g . c o m O C T O B E R 2 0 1 8 43 but it really ties into the overall mission of the firm or is a critical component that supports another hugely profitable practice area. I think you need to take the practice's financial temperature. When you first start out, it's natural for losses to outpace revenue, but once it's established, is it profitable? Are there positive cash flows from the practice? Check that you're not in a race to the bottom, where a practice is becoming so commoditized that you're simply in a race to have the lowest fee. That may be an indicator that you should shed the practice. But, again, that's not an absolute truth. If securing the lowest fee means winning the market, then maybe it is a strategy worth considering. Khorasanee: It is critical that you understand the profitability of your practice areas. Equally critical is to understand how the practice areas are interconnected, as well as understanding what it is that you want to be as a firm. You should assess whether a practice area, even though it may not be all that profitable, allows you to keep a lot of associates busy when they otherwise wouldn't be, which is great. Or it may allow you to win business in another practice that's hugely profitable, because these two areas fit together and clients expect that if we offer them this piece of the service that we're going to offer them that piece of the service. Wilbur: What should law firms consider when evaluating technology? Khorasanee: The topic of technology continues to dominate the minds of leadership in the legal community. Whether it's artificial intelligence, whether it's how you manage the overall data research client information, I think technology is overwhelming for a lot of firms. If firms are very small, they may not have the resources to move forward on all those fronts. They need to decide what's important to them, what to do well today and where they can use the help of technology to just be that much more efficient or better at serving their clients. There are many options available to law firms and several options on how you finance those. So, the key is to do all your homework and to fully explore all the costs against your needs and to work with your external partners, whether it be your accounting firm or your bank or other vendors who are facing similar challenges around technology and the deployment of technology and balancing that against the cost. At CIBC, we have many smaller law firms that just don't have the resources to do these sorts of evaluations. But what we're able to do is we can bring in our in-house experts, and this has nothing to do with banking, and say, "Look, we have folks who are experts in artificial intelligence and who are trying to figure this out for our institution. Let them come in and talk to your people." Nicoló: Law firms need to first consider aligning technology with their business direction, as well as either the technology's suitability to solve any urgent risks or investing in specific technology that can provide a competitive edge. From a risk perspective, a key concern of law firms is if the technology being deployed could potentially compromise data confidentiality and how safeguards can be instated to prevent such a risk from materializing. From a competitive edge perspective, law firms are always on the lookout to find that magical tool or tools that could help them deliver faster and improve quality, ultimately streamlining their processes. Our research shows firms that have successfully evaluated and deployed technology have a good understanding of their internal capabilities to successfully deploy the technology, a process to embed the technology within existing processes with minimal change, effective and strong change management capabilities, a defined budget and good project management. In such a people-driven industry, strong organizational change management processes can lead to the difference between a successful or a failed project. Wilbur: What other challenges are you seeing that law firms are facing in being successful? Nicoló: For the last 20 years, the legal profession has been very static; it really hasn't seen much change. And law firms, in general, have been trailing corporate Canada when it comes to innovating, among other matters. The federal budget tax changes have had profound changes on partners in terms of their personal tax situation. For partners, for example, work in progress will now be included in taxable income, so they are paying tax on that. There's competition from non-traditional service providers. There are a lot of small boutique firms; even the "big four" accounting firms are getting into law. These are just a few examples of some external changes that are having a big impact on law firms. So, the landscape has really changed, it's unprecedented, because for the longest time, it's really been very static. My final thoughts are that many firms are conservative and slow to react or implement change, so it's critical to be nimble. Use technology to your advantage and digitize your practice. Rethink the client experience and differentiate yourself in how you deal with clients. While there is nothing wrong with hourly billing, rethink the billing model. For some services, alternative fee arrangements or other billing models may make sense. And, lastly, outsource what you can and free up time and skills for more valuable work. Khorasanee: The world around law firms is changing. It's changing so quickly that, if you don't know what you want to be, then you have no idea what to focus on to grow or make changes or improve. That is so critical. Do you want to be a regional, diversified firm practice? Or do you want to be a national boutique? Or do you want to be a regional boutique? Are you going to compete with immigration services that one of the accounting firms are starting to provide? You need to know; otherwise, you're going to spin your wheels and a lot of resources — time and financial resources — and you may not get too far ahead. This concept of really understanding what it is you want to be as a firm, it permeates into a lot of the areas we talked about, including culture. That starts with having the conversation and building the road map to who you want to be to remain successful in this changing landscape.

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