Top Scots lawyers call for change to compensation structures

BDO’s Law Firm Leadership Survey polled the managing partners and senior partners of 63 law firms about the factors that would have the greatest impact on their businesses over the next five years. Technology, greater client demands, generational change and legal market consolidation were at the top of the list. Many believe that the challenge of funding technology and innovation is the key driver for the need for the change to compensation structures.

One managing partner of a global law firm said. “Ten years ago, law firm managing partners would have said that law firms would largely stay the same. That’s completely changed.”

Another top lawyer said fundamental change in the Scottish legal sector was needed but required regulatory change to happen first in the form of the introduction of Alternative Business Structures (ABS). He commented: “There is a fundamental thing that has to happen in Scotland, which is ABS. It’s back on the agenda, but it’s been promised for seven years so whether it happens or not, who knows.”

With technology becoming a regular item on boardroom agendas in law firms, Scottish legal leaders expect to introduce a wider range of resources including more technologists and non-legal business professionals.

This is a trend consistent with the global, international and national law firms surveyed. Many are helping firms improve their operations but some are increasingly offering this expertise to clients to enhance processes as they move into a broader consulting space beyond pure legal advice. In contrast, 23 per cent of respondents stated that they expected the number of equity partners in their firms to decline.

The research also found that the changing nature of many roles may result in a move away from the traditional pyramid model of large numbers of junior associates, fewer senior lawyers and a small number of equity partners. Junior lawyers are being replaced by paralegals and in some cases, technology, on lower level tasks.

Martin Gill, lead partner for BDO in Scotland (pictured), said: “Law firm leaders agree that technology is significantly influencing change to law firms on a number of levels in terms of people, delivery of services and investment. As technologists, associates and paralegals are an increasing presence in firms, the challenge will be to implement a training model that develops the next generation of junior lawyers to partner level.

“It will be interesting to see whether Alternative Business Structures will become a reality in the near future as the ability for Scottish firms to take on external capital to fund technology or diversify their service offerings may be key to growth for many. What we do know is that Scottish firms are optimistic about their expectations of growth and the sector is certainly not standing still.”