Surveys reveal key challenges for law firms and government lawyers in Canada

Canadian law firms view themselves as successful, but their definition of success doesn't always align with how they measure or plan for it, according to the inaugural State of the Canadian Law Firm Market report released by the Canadian Bar Association in partnership with the Thomson Reuters Institute.

Bill Josten, a strategic content manager with the Institute, says there's a "bright and optimistic outlook" about many things, including financial performance, over the coming one to three years. Much of that is merited, particularly with how work is shifting and clients are addressing their buying priorities.

But the report released today sheds light on some pressing challenges faced by law firms. The study surveyed 330 lawyers in private practice across Canada last October. The respondents included 90 sole practitioners, 116 in firms of 2-10 lawyers, 84 in firms of 11-179 lawyers, and 40 in large firms of more than 180.

The survey results underscore the need for law firms to adapt, innovate, and prioritize their most valuable asset: their legal professionals. Addressing these challenges will be crucial for the profession as the legal landscape evolves.

Steve Assie, head of Canada for Thomson Reuters, notes that respondents across Canada generally feel positive about their firms, believe they can drive change and are open to adopting generative AI in the coming years. But he cautions that lawyers mustn't take their foot off the gas by avoiding planning and strategizing for the future.

The report reveals that firm reputation has been the most crucial indicator of success, according to respondents, followed closely by client satisfaction, repeat business, and revenues. But it also highlights a "troubling disconnect" between what firms say are the most important indicators of success and what they actually measure. Less than half of respondents said their firms track reputation and even fewer measure client satisfaction.

Legal analyst Jordan Furlong says that many law firms lack a clear definition of success and fail to measure important metrics, such as overall profits or client feedback. 

"If you're not measuring it, you're not really prioritizing it," he says. "To me, that is a big takeaway — the gap between what we say is important and what we're actually doing to ensure that the important stuff is getting done."

Furlong suggests that metrics don't need to be complicated. For example, he proposes that client satisfaction can be measured by simply asking clients for feedback at the end of a retainer or maintaining a spreadsheet to track their requests and outcomes.

That also ties into the gap uncovered by the survey between goals and vision. Respondents point to concerns such as spending excessive time on administrative tasks, rate pressures, and managing mental health as some of the biggest challenges.

But the report highlights a marked contrast between the large number of respondents identifying those challenges and the relatively small number who've implemented a plan and are taking proactive steps to address them, says Josten.

Roughly 60% of respondents indicated their firms had no strategy in place to address those significant challenges.

Josten says the main reason for the lack of strategy is that lawyers from smaller firms, particularly, run their own businesses. The immediate tactical concerns of keeping the lights on and meeting payroll obligations take precedence over the development and execution of a five-year strategic plan.

Another factor is the age-old adage that lawyers want to be the first to be second—better that than being the first to try something new. The problem with that approach, says Josten, is that solutions to challenges will be bespoke. Given that every firm's situation is unique, relying heavily on precedent may not always be practical.

But like the swift transition to work from home prompted by the Covid pandemic, law firms have shown they can plan and implement changes relatively quickly if they need to, reads the report.

In terms of measures to help alleviate burnout and overwork, nearly 3-in-10 firms plan to increase their investment in legal-specific technology. Slightly fewer firms plan to increase investment in business development, attorney headcount and staff support. The vast majority will keep their legal tech spending at current levels.

The report notes that most of the respondents' technology spending will be "to catch up with what has become industry standard," such as time and billing, e-signature and legal research software. However, with the advancements in artificial intelligence, leveraging generative AI to automate some of these tasks could free up capacity for value-driven work, says Josten.

"I think a lot of lawyers in Canada are looking at the potential for generative AI to enable them to go home at 5 p.m. as opposed to going home at seven or 8 p.m.," says Assie.

Conducted at the same time as the state of the legal profession, TRI and the CBA surveyed 70 lawyers working in government agencies across Canada. Like their private practice counterparts, these lawyers predominantly feel (82%) that their organization is successful.

The government lawyers benchmarking report also cites subjective factors such as reputation, employee satisfaction and work-life balance as measures of success, but most of those are not generally tracked. For example, 86% said department reputation was integral to their definition of success, but only 29% of respondents said it was tracked.

Government lawyers identified four top goals for their departments or agencies: improving internal efficiency, enhancing the value they provide, improving employee engagement and well-being, and providing better service to clients.

Lawyers in government cited mental health and well-being as their top challenge. Managing and improving employee mental health and well-being is crucial for attracting and retaining talent, with 81% of government lawyers said is their biggest challenge — a much higher number compared to the 59% of law firm lawyers who cited it as a concern. However, the report found that 88% of lawyers from large firms viewed managing mental health issues as a challenge for their firm, surpassing other law firm segments by more than ten percentage points.

The government benchmarking report also showed a disconnect between the challenges identified by lawyers and the actions taken by their departments to address them. According to the report, "low-hanging fruit," like how work is done, tends to get addressed. More difficult areas, such as increasing internal efficiency, are rarely actioned. Only 10% of departments have implemented changes to improve efficiency.

Josten says the two reports on the Canadian legal profession provide benchmarks to begin measuring success more effectively.

"That's the call to action for what we would love to see when we do the 2025 version, is a much lower preponderance of some of those things to be challenges because they've been addressed."