Challenges Facing Law Firms in the Next 5 Years: A Guide

The legal industry has changed significantly during the pandemic era in ways large and small. These changes will continue to impact legal practices moving forward. In fact, these changes will translate to the top challenges facing law firms over the next five years.

Several of these industry shifts are described in Clio’s 2022 Legal Trends Report, including the following:

1. The increased adoption of remote work, providing flexibility but also causing work-life balance issues.
2. Lawyers experiencing the “Great Resignation” trend.
3. Ongoing high demand for legal service.
4. The impact of inflation and a potential recession.

All of these issues can be viewed as opportunities to strengthen your firm. Below we discuss these challenges in more detail, along with how to address them. With the right planning and technology implementation, these hurdles could transform into launching pads for your practice.

Balancing work and personal life

The pandemic has transformed both where and how lawyers work, and many of these changes appear to be permanent. Cloud-based technology allows attorneys to perform legal tasks, while staying connected to their firms and clients, from any location.  This has resulted in more remote work, less office use, and more firms shifting toward remote or hybrid workplaces (including creating law firm working from home policies).

One side effect of the shift to remote legal work has been the blurring of boundaries between work and personal life. Many attorneys report working outside of business hours and for more days of the week than they would prefer. This is despite the fact that attorneys working regular business hours experience greater job satisfaction. Clearly, the legal profession needs to take steps to make facts on the ground closer to the preferred reality of lawyers.

This is where cloud-based legal practice management (LPM) software provides a true opportunity. The 2022 Legal Trends Report found LPM users have better relationships with both clients and colleagues, compared to non-LPM users. And by enabling a better balance of work and personal life, LPM could even increase job satisfaction. In fact, Clio’s study found that legal professionals using cloud-based LPM software were 29% more likely to report having a good professional life.

Lawyers and the “Great Resignation”

Many industries have gone through the “Great Resignation,” an ongoing economic trend where employees have resigned en masse in the wake of the COVID pandemic.

The legal industry is no stranger to this trend. In 2021, nearly one in five lawyers left the law firm they were working for, and 9% planned to leave their job in the next six months, as found in the 2022 Legal Trends Report. These numbers are even higher for lawyers in mid-size firms, according to the Legal Trends for Mid-Size Firms report.

And why did these attorneys leave or plan to leave? The top responses were better pay, better work-life balance, and job dissatisfaction.

So, how does the Great Resignation provide firms with an opportunity? By giving legal practices the chance to provide lawyers with what they are seeking. This includes competitive salaries and firm cultures that reinforce work-life balance.

When looking at the situation from an employee perspective, firms would do well to remember that many attorneys prefer remote work. In fact, 49% of lawyers prefer working at home, and 45% prefer meeting clients virtually. Accordingly, those firms that offer this type of flexibility will have a competitive advantage in securing the best legal talent.

Growing demand for legal services

The legal industry rebounded from the pandemic in a big way in 2021, with demand for legal services marching higher. The pent-up demand resulted in attorneys nationwide seeing workload increases, with many many firms raising rates, turning down work, or both.

So how on earth could more demand for legal services be a challenge for the legal industry? While it may not currently seem to be a problem, firms that fail to meet the increasing demand for services could face future hurdles. In addition, a legal practice that is currently busy but not attracting new clients could also see issues down the road.

Now may be the time to evaluate whether your firm’s services are in-demand or competitive. Moreover, it’s an excellent time to assess your firm’s work processes and current use of technology. Legal practice management software can help automate many routine tasks, allowing firms to service more clients and capitalize on growing demand.

Inflation and recession

While there is an increase in demand for legal services, there is also looming uncertainty due to high inflation and the threat of a potential recession. It is important that your firm looks at methods of remaining competitive in an inflationary environment while increasing the overall strength of the practice.

In looking at how your law firm can weather inflation and the threat of recession, first look to retain talent with competitive compensation and an attractive work-life balance. Also seek to support your clients with transparent pricing and alternative payment models. Finally, seek to strengthen your firm for the long haul by establishing an emergency fund, managing debt, and adjusting your billing rates to keep up with inflation.

Learn more about automating your law practice with cloud-based legal practice management software—Watch how law firms use Clio. 

The final word on the challenges facing law firms in the next 5 years

All of these challenges arise from industry shifts that also represent opportunities for law firms to improve their processes. The ability to adjust to these trends is what could make your firm stand out as an “antifragile” law firm — a firm that can maintain flexibility, play the long game, and ultimately beat out the competition.

When looking to embrace these opportunities, it pays to know the best resources for knowledge and insights. As a starting point, Clio’s 2022 Legal Trends Report summarizes these latest industry trends, and our Inflation-Proof Guide provides growth strategies while facing recessionary threats. Meanwhile, our Antifragile Law Firm Guide summarizes approaches for maintaining agility, flexibility, and innovation. Combine these insights into a strategy to ensure your firm thrives over the next five years.

We published this blog post in November 2022. Last updated: March 25, 2024.

Categorized in: Business